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singingiiiffy

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« on: Wednesday, January 13, 2010, 21:14:45 »

this is quite a random request but it is something i require information on for uni!

i am currently revising for my final yr exam in business IT and the business exam has a section relating to foreign exchange rates. when linking this into the football world what exactly happens and is it the same process as with any other business?

for example: real madrid have to pay united 80m for ronaldo. if this is payment immediately, would real madrid look at exchange rates before deciding upon payment timeframes? delay the payment at a fixed forward rate? surely foreign exchange rates are a major part in foreign football transfers because it could cost a club an awful lot depending on how it fluctuates.

any sensible info is gratefully received!
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« Reply #1 on: Wednesday, January 13, 2010, 21:23:01 »

Two thoughts based on no fact whatsoever

1. I'd imagine that the selling club would have a pay by date X clause in the contract. So the buying club would need to take their chances on the exchange rate before then - but 80M in the buying clubs bank may make more interest up to the pay by date (or lose less on overdraft!) than would otherwise be lost in exchange rate fluctuations.

2. Be sure that when the papers report 80M that the deal wasn't in fact in Euros, and that the papers did a quick calculation based on that days exchange rate!
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timmyg

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« Reply #2 on: Wednesday, January 13, 2010, 21:23:36 »

Currency exchanges play a huge part in foreign transfers.  I can't remember who it was (Zenden maybe?) who was transfered for a world record GBP fee, but it wasn't a record EUR fee.  Though now that I've written that I'm starting to doubt it's authenticity!

Presumably the "up front" payment is calculated using the current exchange rate, but the future payments would depend on the bank I would imagine? 

In short: Yes.  I don't know.

I know there were a few managers moaning last summer about how much more expensive foreign players had become, simply because the selling club was valueing the player in local currency.
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Simon Pieman
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« Reply #3 on: Wednesday, January 13, 2010, 21:26:32 »

Real Madrid borrow the money and never pay it back.

On a more sensible note, I expect there is some hedging involved.
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Simon Pieman
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« Reply #4 on: Wednesday, January 13, 2010, 21:28:43 »

On an even more sensible note, have you read any books on the finance in sports and particularly football? I'll try and dig out the bibliography from the dissertation I did.
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singingiiiffy

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« Reply #5 on: Wednesday, January 13, 2010, 21:34:45 »

no i
On an even more sensible note, have you read any books on the finance in sports and particularly football? I'll try and dig out the bibliography from the dissertation I did.

no i havent mainly because the exam is not exactly football related like ur dissertation may have been but i wanted to give an example that was more simplistic and easier to remember. which it hasnt done so far! its more out of curiosity and something that isnt publicised that much. a search on google returns....nothing.
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Doore

« Reply #6 on: Wednesday, January 13, 2010, 21:36:21 »

Currency exchanges play a huge part in foreign transfers.  I can't remember who it was (Zenden maybe?) who was transfered for a world record GBP fee, but it wasn't a record EUR fee.  Though now that I've written that I'm starting to doubt it's authenticity!

Presumably the "up front" payment is calculated using the current exchange rate, but the future payments would depend on the bank I would imagine? 

In short: Yes.  I don't know.

I know there were a few managers moaning last summer about how much more expensive foreign players had become, simply because the selling club was valueing the player in local currency.

Bolo Zenden for a world record fee?  Someone's been slightly ripped off...
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Simon Pieman
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« Reply #7 on: Wednesday, January 13, 2010, 21:39:37 »

Oh so really you want info on hedging foreign exchange risks? Practical examples of where it's been used or how it works?
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singingiiiffy

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« Reply #8 on: Wednesday, January 13, 2010, 21:39:55 »

Figo still holds the transfer record. All transfers are recorded in the transactional currency.

Just because of the weakness of Sterling, Kaka's transfer fee is not automatically a record.

Both transfers were in Euro, therefore the record is the greater Euro amount.

Obviously, the Ronaldo deal, if and when it happens, will make this irrelevant. But I'd be interested in knowing what currency is being used (yes, I'm a banker - no ryhming slang necessary).
__________________________________________________________
managed to find this snippet from a comment on the ronaldo transfer
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Simon Pieman
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« Reply #9 on: Wednesday, January 13, 2010, 21:45:27 »

From the Arsenal 2007/08 annual report:

Quote
The Group enters into a number of transactions, relating mainly to its participation in European competition and
player transfers, which create exposure to movements in foreign exchange. The Group monitors this foreign exchange exposure on a continuous basis and has facilities in place to hedge any significant exposure in its
currency receivables and payables.

I'm not sure this is the sort of stuff you need mind
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Summerof69

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« Reply #10 on: Wednesday, January 13, 2010, 22:43:30 »

Normally transfer fees are paid over a period of time, so undoubtedly there would be some hedging involved, but with the Ronaldo transfer Man Yoo insisted that the transfer fee was paid in full on the 1st July, so all 80m was paid at once probably, as the accounts came out a couple of days ago that Man Yoo owe 700m and are short of cash !!
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Nemo
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« Reply #11 on: Wednesday, January 13, 2010, 22:45:42 »

Man Utd made 40 odd million profit AFTER the Ronaldo deal was included, which means that after taking out one off profits they'll have lost 40m. That's a whole lot of money.
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nevillew
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« Reply #12 on: Thursday, January 14, 2010, 07:55:15 »

On a more sensible note, I expect there is some hedging involved.

Probably, but that information would be privet and coniferdential
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« Reply #13 on: Thursday, January 14, 2010, 13:01:08 »

In the UK I think they have a time limit of a year for transfers to be completed. In Italy I know it was 4 years, which resulted in farcical transfers like that of Hernan Crespo, who was transfered every season for about 4 seasons.

Transfers are usually done in Euro's if one of the clubs is in the Euro zone. English clubs have been struggling a little bit with the weakness of the pound, resulting in a few more all English transfers. But as the Premier League is usually the world leader in inflating transfer fees it hasnt made as much difference as it might have.
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