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Firm And Industry Characteristics Of Exchange Rate Exposure And Optimal Hedging Strategy
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Book Synopsis Firm and Industry Characteristics of Exchange Rate Exposure and Optimal Hedging Strategy by : Fen Yan
Download or read book Firm and Industry Characteristics of Exchange Rate Exposure and Optimal Hedging Strategy written by Fen Yan and published by . This book was released on 2010 with total page 96 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Understanding the effect of foreign exchange rate movements on the value of firm is a critical element for the purpose of risk management. In this thesis, firm and industry specific exposures to exchange rate movements in the Chinese market before and after the exchange rate regime reform in 2005 are examined. We observe that at the one-week return horizon, among all the firms listed in the China Exchange Market before the year 2001, less than 10% of the firms exhibit significant "residual exposure" to bilateral exchange rate movements against China's major trading partners before the reform. In contrast, the proportion of firms with significant exposure increase to over 20% for some bilateral exchange rates after the reform. The "total exposure" is measured by using orthogonal market returns in place of market returns and a much higher percentage of firms exhibit significant "total exposure". We also observe that the number of firms with significant exposure increases with the return time horizon, regardless of whether it is residual exposure or total exposure. The phenomenon of asymmetric exposure is also examined; the results show that 4.5% of firms exhibit asymmetric exposure during appreciation and depreciation cycles with respect to all the major bilateral exchange rates and the percentage of firms with asymmetrical exposure also increase with the return horizon. As for the industry-specific exposure, about 90% of Chinese industries at the three-digit SIC level are significantly exposed to both bilateral and trade-weighted exchange rate movements. The predominantly positive exposure effect indicates that most industries behave like net exporters and benefit from the depreciation of RMB. Theoretical models are built to simulate how firms in export, import and import-competing industries make decisions to maximize their profits when foreign exchange rates fluctuate. We show that our models are consistent with the observed empirical relationship between the exchange rate exposure of the Chinese industries and the important elasticity against the U.S. dollar and the Japanese yen."--Author's abstract.
Book Synopsis Exchange Rate Risk and the Multinational Firm by : Harry Leon White
Download or read book Exchange Rate Risk and the Multinational Firm written by Harry Leon White and published by . This book was released on 1984 with total page 170 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Pass-through Exposure by : Gordon M. Bodnar
Download or read book Pass-through Exposure written by Gordon M. Bodnar and published by . This book was released on 1999 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Determinants of Exchange Rate Hedging by : Zachary M. Lehner
Download or read book Determinants of Exchange Rate Hedging written by Zachary M. Lehner and published by . This book was released on 2011 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a sample of 141 U.S. small-cap industrial firms, I examine the firm characteristics that influence its use of foreign exchange derivatives to hedge exchange rate risk. Companies in the industrial sector produce goods and services that are used for the production of another final product. The performance of this sector is closely correlated to the level of demand from the final consumer.
Book Synopsis Exchange Rate Risk Measurement and Management by : Mr.Michael G. Papaioannou
Download or read book Exchange Rate Risk Measurement and Management written by Mr.Michael G. Papaioannou and published by INTERNATIONAL MONETARY FUND. This book was released on 2006-11-01 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Measuring and managing exchange rate risk exposure is important for reducing a firm's vulnerabilities from major exchange rate movements, which could adversely affect profit margins and the value of assets. This paper reviews the traditional types of exchange rate risk faced by firms, namely transaction, translation and economic risks, presents the VaR approach as the currently predominant method of measuring a firm's exchange rate risk exposure, and examines the main advantages and disadvantages of various exchange rate risk management strategies, including tactical versus strategical and passive versus active hedging. In addition, it outlines a set of widely accepted best practices in managing currency risk and presents some of the main hedging instruments in the OTC and exchange-traded markets. The paper also provides some data on the use of financial derivatives instruments, and hedging practices by U.S. firms.
Book Synopsis Foreign Exchange Rate Exposure and Its Determinants by : Ahmed Ahmed El-Masry
Download or read book Foreign Exchange Rate Exposure and Its Determinants written by Ahmed Ahmed El-Masry and published by . This book was released on 2006 with total page 254 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis What Lies Beneath by : Söhnke M. Bartram
Download or read book What Lies Beneath written by Söhnke M. Bartram and published by . This book was released on 2019 with total page 32 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents results from an in-depth analysis of the foreign exchange rate exposure of a large nonfinancial firm based on proprietary internal data including cash flows, derivatives and foreign currency debt, as well as external capital market data. While the operations of the multinational firm have significant exposure to foreign exchange rate risk due to foreign currency-based activities and international competition, corporate hedging mitigates this gross exposure. The analysis illustrates that the insignificance of foreign exchange rate exposures of comprehensive performance measures such as total cash flow can be explained by hedging at the firm level. Thus, the residual net exposure is economically and statistically small, even if the operating cash flows of the firm are significantly exposed to exchange rate risk. The results of the paper suggest that managers of nonfinancial firms with operations exposed to foreign exchange rate risk take savvy actions to reduce exposure to a level too low to allow its detection empirically.
Book Synopsis Managing Currency Risk by : Takatoshi Ito
Download or read book Managing Currency Risk written by Takatoshi Ito and published by Edward Elgar Publishing. This book was released on 2018-07-27 with total page 298 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book demonstrates how exporters’ decisions regarding choice of invoice currency can be influenced by many factors including firm size, product competitiveness, intra/inter-firm trades, and the geography of export destination. The aim is to enhance our understanding of exporters’ behavior in terms of managing currency risk. It contains detailed research and insightful data focusing on Japanese exporters and shows how they face an important trade-off in choosing the invoice currency. If exports are invoiced in yen, then exchange rate fluctuations will pass through to retail prices ultimately affecting sales volumes. However, if they choose to invoice in the importer’s currency, then sales volumes are largely unchanged.
Book Synopsis Exchange Rates and Corporate Performance by : Yakov Amihud
Download or read book Exchange Rates and Corporate Performance written by Yakov Amihud and published by Beard Books. This book was released on 2003 with total page 268 pages. Available in PDF, EPUB and Kindle. Book excerpt: This is a reprint of a previously published book. It consists of a series of papers by experts in the field on how the exchange rate volatility of the 1980s affected the financial policies of international firms.
Book Synopsis Foreign Exchange Intervention Rules for Central Banks: A Risk-based Framework by : Romain Lafarguette
Download or read book Foreign Exchange Intervention Rules for Central Banks: A Risk-based Framework written by Romain Lafarguette and published by International Monetary Fund. This book was released on 2021-02-12 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents a rule for foreign exchange interventions (FXI), designed to preserve financial stability in floating exchange rate arrangements. The FXI rule addresses a market failure: the absence of hedging solution for tail exchange rate risk in the market (i.e. high volatility). Market impairment or overshoot of exchange rate between two equilibria could generate high volatility and threaten financial stability due to unhedged exposure to exchange rate risk in the economy. The rule uses the concept of Value at Risk (VaR) to define FXI triggers. While it provides to the market a hedge against tail risk, the rule allows the exchange rate to smoothly adjust to new equilibria. In addition, the rule is budget neutral over the medium term, encourages a prudent risk management in the market, and is more resilient to speculative attacks than other rules, such as fixed-volatility rules. The empirical methodology is backtested on Banco Mexico’s FXIs data between 2008 and 2016.
Book Synopsis International Convergence of Capital Measurement and Capital Standards by :
Download or read book International Convergence of Capital Measurement and Capital Standards written by and published by Lulu.com. This book was released on 2004 with total page 294 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Management of Currency Risk by : Boris Antl
Download or read book Management of Currency Risk written by Boris Antl and published by Euromoney Publications. This book was released on 1989 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt: Divides into 10 parts:framework of foreign exchange exposure management; currency risk and exposure; objectives and strategies; other elements of foreign exchange exposure management; markets and techniques; uses and applications; international accounting and disclosure; international taxation; management evaluation and control; and company profiles.
Book Synopsis Value at Risk, 3rd Ed. by : Philippe Jorion
Download or read book Value at Risk, 3rd Ed. written by Philippe Jorion and published by McGraw Hill Professional. This book was released on 2006-11-09 with total page 624 pages. Available in PDF, EPUB and Kindle. Book excerpt: Since its original publication, Value at Risk has become the industry standard in risk management. Now in its Third Edition, this international bestseller addresses the fundamental changes in the field that have occurred across the globe in recent years. Philippe Jorion provides the most current information needed to understand and implement VAR-as well as manage newer dimensions of financial risk. Featured updates include: An increased emphasis on operational risk Using VAR for integrated risk management and to measure economic capital Applications of VAR to risk budgeting in investment management Discussion of new risk-management techniques, including extreme value theory, principal components, and copulas Extensive coverage of the recently finalized Basel II capital adequacy rules for commercial banks, integrated throughout the book A major new feature of the Third Edition is the addition of short questions and exercises at the end of each chapter, making it even easier to check progress. Detailed answers are posted on the companion web site www.pjorion.com/var/. The web site contains other materials, including additional questions that course instructors can assign to their students. Jorion leaves no stone unturned, addressing the building blocks of VAR from computing and backtesting models to forecasting risk and correlations. He outlines the use of VAR to measure and control risk for trading, for investment management, and for enterprise-wide risk management. He also points out key pitfalls to watch out for in risk-management systems. The value-at-risk approach continues to improve worldwide standards for managing numerous types of risk. Now more than ever, professionals can depend on Value at Risk for comprehensive, authoritative counsel on VAR, its application, and its results-and to keep ahead of the curve.
Book Synopsis Currency Strategy by : Callum Henderson
Download or read book Currency Strategy written by Callum Henderson and published by John Wiley & Sons. This book was released on 2006-05-01 with total page 264 pages. Available in PDF, EPUB and Kindle. Book excerpt: Currency Strategy, Second Edition develops new techniques and explains classic tools available for predicting, managing, and optimizing fluctuations in the currency markets. Author Callum Henderson shows readers ho to use mathematical models to assist in the prediction of crises and gives practical advice on how to use these and other tools successfully. Given there such huge focus on China at the moment, the timing of this new edition is particularly important. The new edition will feature a thorough update on the key developments in the past 3 years, new chapters on emerging markets, an in-depth review of the markets of China and India and their currencies and much more.
Book Synopsis Dominant Currency Paradigm: A New Model for Small Open Economies by : Camila Casas
Download or read book Dominant Currency Paradigm: A New Model for Small Open Economies written by Camila Casas and published by International Monetary Fund. This book was released on 2017-11-22 with total page 62 pages. Available in PDF, EPUB and Kindle. Book excerpt: Most trade is invoiced in very few currencies. Despite this, the Mundell-Fleming benchmark and its variants focus on pricing in the producer’s currency or in local currency. We model instead a ‘dominant currency paradigm’ for small open economies characterized by three features: pricing in a dominant currency; pricing complementarities, and imported input use in production. Under this paradigm: (a) the terms-of-trade is stable; (b) dominant currency exchange rate pass-through into export and import prices is high regardless of destination or origin of goods; (c) exchange rate pass-through of non-dominant currencies is small; (d) expenditure switching occurs mostly via imports, driven by the dollar exchange rate while exports respond weakly, if at all; (e) strengthening of the dominant currency relative to non-dominant ones can negatively impact global trade; (f) optimal monetary policy targets deviations from the law of one price arising from dominant currency fluctuations, in addition to the inflation and output gap. Using data from Colombia we document strong support for the dominant currency paradigm.
Book Synopsis Risk Management of Sovereign Assets and Liabilities by : Mr.D. F. I. Folkerts-Landau
Download or read book Risk Management of Sovereign Assets and Liabilities written by Mr.D. F. I. Folkerts-Landau and published by International Monetary Fund. This book was released on 1997-12-01 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: In an environment of sizable and volatile capital flows and integrated international capital markets, large and unhedged net external sovereign liabilities expose countries to swings in international asset prices and to potential speculative currency attacks. The paper argues that an essential step in reducing emerging market vulnerability to such external shocks is to reform the institutional arrangements governing asset and liability management policies, so as to promote a transparent, publicly accountable, and professional incentive structure.
Book Synopsis Issues in Finance and Monetary Policy by : J. McCombie
Download or read book Issues in Finance and Monetary Policy written by J. McCombie and published by Springer. This book was released on 2007-01-30 with total page 213 pages. Available in PDF, EPUB and Kindle. Book excerpt: The book investigates the contemporary functioning of financial institutions and monetary policies in order to assess their effects in different economic situations. It advances some proposals to improve their contribution towards a more stable and vigorous economy in the context of both developed and developing countries.
