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The Empirical Research of Financial Derivatives Used in Enterprise Exchange Rate Risk Management

Author: WangYiSong
Tutor: KuangZhiJun
School: East China Jiaotong University
Course: Management Science and Engineering
Keywords: risk management exchange rate risk hedging financial derivativ
CLC: F830.9
Type: Master's thesis
Year: 2013
Downloads: 10
Quote: 0
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Abstract

Since the1970s, with the collapse of the BrettonWoods system, the dollar-basedfixed exchange rate system had collapsed, floating exchange rate to become one of themain forms of international foreign exchange market; world economic and financialenvironment has undergone a series of changes, and China after the reform andopening up domestic financial markets gradually pace with international standards,accession to the World Trade Organization (WTO) in2003, this development trendhas accelerated; after2008, the RMB against the U.S. dollar exchange rateappreciation of the process of acceleration, with a large number of foreign currencyespecially export-oriented enterprises, the negative impact should not beunderestimated; the EU after the2010debt crisis, leading to changes in exchangerates increasingly unstable. However, due to the RMB exchange rate long-term in theso-called "super stable" state of the domestic enterprises generally weak awareness ofthe exchange rate risk, the lack of effective management of the exchange rate risk.This is the study of financial derivatives and its application in the exchange rate riskmanagement background, but also its theoretical and practical significance.From the perspective of whether the use of financial derivatives, the exchangerate risk management methods can be divided into two types: one for traditionalhedging methods that use financial derivatives exchange rate risk managementpractices related to the theoretical research and practical applications quite mature,and few of the main exchange rate risk management are often used such methods;another theory research focus areas for the use of financial derivatives, the exchangerate risk management approach because it is effective in practical applications. Usefinancial derivatives to manage exchange rate risk, is now generally known ashedging, hedging in the narrow sense refers only to hedging transactions in a broadsense is synonymous with financial risk management.The ultimate goal of this study is the exchange rate risk management strategy for the subjects to provide practical and reliable. Based on the optimal hedge ratio todetermine the understanding of the core of the modern hedging, Comparison andAnalysis of the first hedging research, review the history of the financial derivativesdevelopment, collation and analysis some methods, and look to the future direction ofdevelopment of the field; and then build the theoretical framework of an exchangerate risk hedging to scattered situation exists to some extent, solve the research in thisfield. The theoretical framework to build an export enterprise, for example, the coremethods to maximize the expected utility analysis. After the defined cost function andutility function of the export enterprises and their use of financial derivatives marketconditions, the confirmation of the different strategies on the export business; next usethis method of analysis of the theoretical framework of the exchange rate risk andhedging preserve and increase the field of theoretical study of three major issues,including export enterprises and the relationship of the exchange rate risk, the pricingof export products, the choice of exchange rate risk derivatives in the validationframework is applicable of the same time, some valuable conclusions; final empiricalpart of the selective use the data of import and export companies use derivatives tocontrol the effect of exchange rate risk to come to a good use of financial derivativesto control foreign exchange risk.The main innovation of the theoretical studies is to propose a theoreticalframework of an exchange-rate risk management, and analysis method to study anumber of major issues in the field of exchange rate risk with derivatives, confirmedthat the unified framework of the applicability of the potential; in The empiricalanalysis of innovation performance in the more successful integration of our country’sspecific conditions of the main exchange rate risk management simple hedgingstrategy.

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