Abstract
In today¡¦s worldwide economy, to stay competitive a company needs to take advantage of every opportunity to lower their costs, to increase margins and realize the saving that can come from doing business overseas. Today trillions of dollars in the currencies trade everyday in markets around the world. The currency markets are considered to be one of the most efficient markets. As companies dealing with import and export, they have exposure to currencies risk. The increasing difficulty in understanding exchange rate determination has led to for corporations how to approach the currency hedging decision. The importance of financial and operational hedges as tools for managing foreign-currency exposure is examined.
In this thesis, the three basic methods for evaluating the currency risks are with the use of the spot rate method, the future rate method and the currency options. The results are summarized as follow:
1. In terms of currency exposure, the sport rate method leaves the currency exposure un-hedged. Futures and the options hedge technique are most widely used and the information to evaluate the use of these instruments as a hedging tool is readily available. Still, the less efficiency method is the future rate method. The most effective approach is the currency options, have the advantage of more flexibility than the future rate.
2. By comparison with the future rate and currency options, the future rate is determinate by swap point, the negative connotations attached to its disadvantage is the ¡§fixed currency rate¡¨. No matter the currency moves toward company¡¦s favor or unflavored, the funds to fulfill the forward contract will be exercised in maturity date. Other than the future rate hedge, the currency options are based upon the ¡§Buy Call¡¨. Within a certain period in the future, when currency rate is moving toward currency¡¦s profit or loss, the company could decide to exercise or give up the ¡§Buy Call¡¨. The difference is that the currency option hedge is determined by the ¡§Right to Exercise Buy Call¡¨ or ¡§Right No to Exercise Buy Call¡¨ which give company more flexibility in FX hedging. In conclusion, the re-thinking of currency hedging is conservative because it is single-mindedly focused on risk-reducing approaches to exchange rate risk management.
| Identifer | oai:union.ndltd.org:NSYSU/oai:NSYSU:etd-0816102-013141 |
| Date | 16 August 2002 |
| Creators | Hsieh, Mei-Yu |
| Contributors | David S. Shyu, Feng-Yang Kuo, An-Lin Chen |
| Publisher | NSYSU |
| Source Sets | NSYSU Electronic Thesis and Dissertation Archive |
| Language | Cholon |
| Detected Language | English |
| Type | text |
| Format | application/pdf |
| Source | http://etd.lib.nsysu.edu.tw/ETD-db/ETD-search/view_etd?URN=etd-0816102-013141 |
| Rights | unrestricted, Copyright information available at source archive |
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