Multilateral netting is using IC open positions in two currencies that are expected to balance each other. is more expensive than hedging. creates competition among subsidiaries. should be avoided.

Using IC open positions in two currencies that are expected to balance each other.

Explanation:

Multilateral Netting is the Inter Company (IC) centralization of payments and receipts so that payments and receipts can be offset.

This reduces transaction and hedging costs.

It works by netting inflows and outflows against each other of different subsidiaries in a centralized currency. A final figure is then reached and this is the only figure that would need to be converted to the currency of payment.

This is very helpful for firms in multiple geographical locations.

If you need any clarification do react or comment.