Title: Corporate Strategies for Currency Risk Management ackground:Currency fluctuations are a global phenomenon, and can affect multinational companies directly through their cash flow, financial result and company valuation. The exposure to currency risks might however be covered against or ‘hedged’, as it is called, by different external and internal corporate strategies. However, some of these strategies might include a risk themselves as they can be expensive and uncertain. It is therefore an interesting question whether if these strategies are actually applied in practice, and if so which strategies are favored and why. Purpose: The purpose of this thesis is to present and explain the different external and internal hedging techniques and to see which, or if any, strategies are favored by large, medium-sized and small companies and for what reasons. Method: Regarding primary data, interviews with a mostly qualitative profile have been used to discuss the subject with respondents from six companies, diversified in size using the classification from the European Commission. Secondary data has been collected through literature from the university library and internet sources. Conclusion: Large companies primarily use the strategy of forwards, since they carry high elements of risk aversion, predictability and simplicity. For internal strategies, large companies prefer netting. Small companies extensively use matching because the routine is easy to establish and handle. Medium-sized companies can use either one so much depends on the risk-aversion and cash-flow management of the company. Large companies continuously regard currency risk a big factor, whereas small companies have just recently started due to the dollar depreciation. Translation exposure should be considered a big risk regardless of the company size, if the company is the main one in a corporate group. Finally, the subject of currency risk management is very theoretically broad, but its appliance in practice is very slim as only a few strategies are actually favored and frequently used.

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Ladygienė, Živilė. (2007) Valiutinės rizikos valdymas įmonėje. Magistro baigiamasis darbas. Kaunas Vilniaus Universiteteas, Kauno humanitarinis fakultetas. 61 p. SANTRAUKA Raktiniai žodžiai: Valiuta, valiutos kursas, valiutinė rizika, valiutinės rizikos valdymas, apsidraudimo priemonės. Darbo objektas – valiutinės rizikos valdymas. Darbo tikslas: Pateikti įmonei valiutinės rizikos valdymo sistemą. Darbo uždaviniai: 1. Apžvelgti veiksnius kurie turi įtakos valiutinės rizikos atsiradimui. 2. Įvertinti patiriamos rizikos lygį tiriamojoje įmonėje panaudojant matematines skaičiuotes. 3. Išnagrinėti priemones kurios gali turėti įtakos valiutinės rizikos valdymui. 4. Pateikti pasiūlymus kaip įmonė gali valdyti valiutinę riziką. Darbo rezultatai. Pasirinktas valiutinės rizikos valdymo modelis suteikia galimybes įvertinti valiutinę riziką, pasirinkti adekvačias apsidraudimo priemones ir prognozuoti laukiamus rezultatus. Šis modelis apima visus valiutinės rizikos valdymo ciklus. Tai leidžia įmonei išmatuoti riziką, pasirinkti finansinius valiutinės rizikos valdymo instrumentus. Pagal valiutinės rizikos valdymo modelį buvo sudarytas valiutinis balansas, apskaičiuota atvira užsienio valiutos pozicija, variacijos/kovariacijos metodu apskaičiuota rizikos vertė, parinktos tinkamiausios apsidraudimo primonės valiutinei rizikai valdyti. Buvo palyginti nuostoliai kuriuos patyrė įmonė nevaldydama valiutinės rizikos ir jei būtų pritaikytos išvestinės apsidraudimo priemonės, įmonė būtų patyrusi... [toliau žr. visą tekstą] / Ladygienė, Živilė. (2007) Currency risk managament in enterprise. MBA Graduation Paper: Kaunas Faculty of Humanities, Vilnius University. 61 p. SUMMARY Keywors: currency, currency exchange rate, currency risk, currency risk managament, hedging instruments. The object of a scientific research – currency exchange risk management. Tasks: 1) to systematise the factors influencing currency exchange risk; 2) to assess the level of risk in enterprise; 3) to analyze modern hedging methods and means aimed to control currency exchange rate risk and determine the possibility of their application in enterprise; 4) to proffer suggestion how enterprise can manage currency risk. Choosed currency exchange rate risk management model gives conditions to realistically estimate currency exchange rate risk, choose adequate hedging instruments and forecast financial results for an enterprise. This model covers all the stages of the management cycle of currency exchange rate risk. Using this model made: currency exchange balance and calculation of open currency exchange positions for determining the risk; quantitative measurement variance/covariance method for measuring risk; choosing hedging means and instruments based on terms. It allows enterprise to measure the risk, choose adequate risk management instruments, forecast financial result and cash flows of the enterprise. The results of currency exchange rate risk managing in enterprise were that damage of rate risk was 10 times smoler when not... [to full text]

Recent research has shown that money substitutes - whether in the form of foreign currency or of more exotic instruments such as privately-issued moneys - are common in developing and transition countries, and have important consequences for macroeconomic and financial sector policy. The aim of this thesis is to advance our theoretical and empirical understanding of the determinants of money substitution in developing and transition economies. We begin in Chapter 1 by addressing the need for a general theoretical framework for the analysis of money substitutes. Reviewing both the classical and the modern theoretical literature on money, we conclude that the Credit theory of money - an ancient but until recently neglected theory which conceives of money as a unilateral financial contract between its issuer and its bearer - is a useful framework for such analysis. In Chapter 2, we undertake an empirical analysis of non-cash settlements (NCS) in Croatia. Using time series econometric analysis, we demonstrate that the instruments used to settle NCS are at least in part substitutes for the national currency, created endogenously by the enterprise sector in response to constraints on their participation in the official monetary and banking system. We turn to the most important form of money substitute in developing and transition countries - foreign currency - in Chapter 3, where we present a new review of the theoretical and empirical literature on dollarisation. In particular, we track the evolution of theoretical models of dollarisation in response to the increasing empirical importance of financial dollarisation relative to currency substitution. In Chapter 4 we undertake an empirical study of the determinants of deposit dollarisation in the two transition economies of Estonia and Lithuania by building and interpreting dynamic, multiple equation, econometric models. We find that a simple, portfolio theoretic account of the dollarisation process furnishes a good explanation, but also that data availability limits the level of analytical detail that this approach can attain.

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This thesis examines China's exchange rate and its relationship with China's foreign trade in the reform period from the late 1970s to the present. China's foreign exchange management system has undergone major changes in the past two decades. The exchange rate regime has evolved from a fixed (but adjustable) rate, to a dual exchange rate system in the 1980s and early 1990s, and to a managed floating rate in the mid 1990s. The official exchange rate was devalued substantially from 1980 to 1994. Since1995, the official exchange rate has been de facto pegged to the US dollar. Although the nominal exchange rate is subject to central bank intervention in the foreign exchange market, the government claims that China’s currency, the Renminbi, achieved current account convertibility at the end of 1996. / The parallel exchange rates were an internal settlement rate adopted in the 1981-1984 period and a swap market rate in the 1987-199:3 period. The internal settlement rate was based on the cost of foreign exchange earnings and it was constant over the period. The swap market rate was semi-market-determined in foreign exchange swap markets in which foreign exchange retention quotas were traded. Since the official exchange rate and the interest rate were rigorously controlled by China's authorities, it is not surprising that purchasing power parity and interest rate parity do not hold for this period. However, it is found that the swap market premium over the official exchange rate is closely related to the inflation differential between China and the United States. / Trade liberalisation accompanied by currency devaluation has been one of key elements of the successful experience of the Chinese economy. This thesis calculates a new and improved series for the real effective exchange rate in order to estimate the effects of exchange rate changes on foreign trade. By estimating real export and import equations, it is found that changes in the real exchange rate did affect the volumes of foreign trade, and that a real devaluation would promote exports and restrain imports, thus improving the trade balance. / China has a strongly dualistic trade regime, and because of this characteristic the total trade account is disaggregated into processing and other trade. Processing trade is the trade of export processing when imported intermediate inputs are processed in China and then the finished goods are exported. A model of fragmentation with multistage production is set up to analyse the relationship between exchange rate changes and the volume of processing trade. The model shows that a devaluation of the domestic currency would likely increase China's processed exports and domestic employment. The empirical evidence is consistent with the findings from the theoretical model. / The thesis then goes on to examine China's exchange rate mechanism. Official documents and statements clearly indicate that export promotional was a major objective of the authorities in adjusting the exchange rate and that price stability was also a key factor in determining the level of the official exchange rate, particularly after the late 1980s. The results from estimating policy reaction functions suggest that the authorities did adjust the exchange rate in response to changes in trade performance and prices (or the rate of inflation). A worsening trade account would prompt the authorities to devalue the currency while rising inflation would slow the pace of devaluation. / The findings from this thesis imply that the current policy of a nominal exchange rate pegging to the US dollar and related restrictions on foreign exchange and imports will not assist further liberalisation of foreign trade, which is necessary to sustain China’s economic growth. With the accession to the World Trade Organisation in the near future, an exchange rate policy consistent with the reduction of trade restrictions is an urgent need for the Chinese economy.

Thesis (Ph. D.)--University of Washington, 2000. / Vita. Includes bibliographical references (leaves 185-196).

Thesis (Ph. D.)--Columbia University, 1928. / Vita. Published also as Studies in history, economics, and public law, edited by the Faculty of political science of Columbia University, no. 299. eContent provider-neutral record in process. Description based on print version record. Includes bibliographical references (p. 204-208).

Thesis (Ph. D.)--University of Pennsylvania, 1937. / Bibliography: p. [229]-232.

Thesis (doctoral)--Göteborgs universitet, 1988. / Added t.p., with thesis statement and English abstract inserted. Includes bibliographical references (p. 220-247).