Foreign exchange investment classroom of foreign exchange risk
read:2023/2/24 22:26:19
domestic investors consider overseas investment, the local currency appreciation forextradingaccountstype is confused most peoples problem for the global portfolio, forextradingaccountsregister forex trading accounts fluctuations brought about by the risk of a considerable component of the global equity portfolio of about 25% of the net value of fluctuations in risk from foreign exchange, cashback forex a variety of currency basket can effectively resolve the medium and long-term foreign exchange risk foreign exchange risk ( ForeignExchangeExposure) ForeignExchangeExposure) is a financial company, business organization, economic entity, country or individual in a certain period of time in the foreign economy, trade, finance, foreign exchange reserves management and operation activities, expressed in foreign currency assets (claims, equity) and liabilities (debts, obligations) due to unanticipated changes in foreign exchange rates caused by the increase or decrease in the value of Foreign exchange risk (ForeignExchangeExposure) is the possibility that foreign currency-denominated assets will rise or fall due to changes in exchange rates caused by changes in the foreign exchange market. Foreign exchange risk can have two results, either gain (Gain); or suffer a loss (Loss) in all the activities of an international business organization, namely In the process of its business activities, the results, the expected operating income, there are foreign exchange risk caused by changes in foreign exchange rates in the business activities of the risk for the transaction risk (TransactionExposure), in the results of business activities of the risk for the accounting risk (AccountingExposure) expected operating income risk for the economic risk ( EconomicExposure) EconomicExposure) Foreign exchange risk is a term used in foreign economic, trade, investment and financial companies, business organizations, individuals and the management and operation of national foreign exchange reserves, usually receive and pay large amounts of foreign currency in the international arena, or hold foreign currency claims and debts, or denominate the value of their assets and liabilities in foreign currency because of the different currencies used in different countries, coupled with frequent changes in currency exchange rates between countries. Therefore, in the international economic transactions, in the international settlement of payments and receipts, foreign exchange risk will arise Second, foreign exchange risk classification Narrow foreign exchange risk refers to the exchange rate risk and interest rate risk Broad foreign exchange risk including interest rate risk, exchange rate risk, also including credit risk, accounting risk, country risk, etc. In this chapter we are from a narrow perspective to discuss risk from the perspective of the international foreign exchange market foreign exchange trading, trading The part of the profit and loss failed to offset, it faces the risk of exchange rate changes The foreign currency amount of the part of foreign exchange risk is called the risked part or foreign exchange exposure Enterprise foreign exchange risk: trading risk, accounting risk, economic risk (1) it comes with subjective awareness (2) it does not include the forecast exchange rate changes (3) its risk impact than trading risk and translation risk Business risk 1, foreign exchange trading risk (1) foreign exchange bank ( (2) foreign exchange position (3) the type of bank buying and selling foreign exchange on behalf of the customer buying and selling, self-dealing 2, foreign exchange credit risk: in foreign exchange transactions due to the parties to default and the risk to the bank 3, liquidation risk (settlementrisk) Third, the national foreign exchange reserves risk A country all foreign exchange reserves due to the devaluation of the reserve currency and the risk it mainly Including the national foreign exchange inventory risk and the national foreign exchange reserves investment risk Since 1973, the international community to implement the floating exchange rate system, the worlds foreign exchange reserves are facing the same kind of operating environment, that is, the reserve currency diversification, reserve currency to the U.S. dollar, including the U.S. dollar, the reserve currency exchange rate fluctuations are very large so that the countries of foreign exchange reserves are facing great risk because foreign exchange reserves are the international solvency The most important composition, is an important symbol of the size of a countrys national power, so the risk of foreign exchange reserves once the reality, the consequences are very serious From its field of view, foreign exchange risk can be broadly divided into two categories of commercial exchange rate risk and financial exchange rate risk Commercial exchange rate risk: commercial exchange rate risk is mainly refers to people in international trade (quotation zone) due to exchange rate changes and suffer losses The most common and important risk in foreign exchange risk Financial exchange rate risk: financial exchange rate risk includes debt risk and reserve risk Fourth, how to avoid foreign exchange risk Enterprise foreign exchange risk and settlement of a specific transaction, refers to the enterprise to foreign currency in the process of various transactions, due to changes in the exchange rate to reduce the amount converted to local currency and the loss caused by various transactions include: in the form of credit Transactions can also be divided into completed transactions and uncompleted transactions. Completed transactions are included in the balance sheet items, such as accounts receivable and accounts payable in foreign currency; uncompleted transactions are mainly off-balance sheet items, such as future purchases, sales, rents, and expected income and expenses in foreign currency, etc. 1. The internal technique of risk prevention refers to the internal techniques used by enterprises to prevent and reduce foreign exchange risks. Before signing a transaction contract, measures are taken to prevent risks, such as choosing a favorable currency of denomination and adjusting commodity prices appropriately. The core of this approach is to try to hold coin assets or soft currency debt in a currency that is most likely to maintain its value or even increase in value, while coins tend to remain constant or increase in value relative to the local currency or another base currency, and soft currencies tend to decrease in value. Enterprises on the natural prevention of transaction risk such as borrowing and lending method, when enterprises have accounts receivable expressed in foreign currency, can borrow a foreign currency funds equal to the accounts receivable, in order to achieve the purpose of preventing transaction risk Choose a favorable denomination currency foreign exchange risk size and foreign currency currency has a close link, the transaction of the currency of receipt and payment, the foreign exchange risk will be different in foreign exchange receipts and payments, in principle For example, in the import and export trade, the import payment should be made in soft currency, and the export payment should be made in hard currency; when borrowing foreign capital, the risk is smaller if the soft currency is borrowed. In the contract, the currency protection clause is set up in the contract after the negotiation between the two parties to prevent the risk of changing exchange rates. There are many types, and there is no fixed pattern, but no matter what kind of preservation method is used, as long as the contracting parties agree, and can achieve the purpose of preservation can be mainly gold preservation, hard currency preservation, a basket of currency preservation in the current contract is generally used in the hard currency preservation clause set up this kind of preservation clause, need to pay attention to three points: first, to specify the currency due to pay the goods; second, the selection of another hard currency preservation Finally, in the contract to indicate the settlement currency and the value of the currency in the contract when the spot rate of payment, if the settlement currency devaluation of more than the contract, the settlement currency and the value of the new exchange rate of the currency will be adjusted so that it is still equal to the amount of the original converted value of the currency in the contract Appropriate adjustment of the value of goods in the import and export trade, should generally adhere to the principle of receiving coins for exports and paying soft currency for imports But sometimes for some reasons exports have to use soft currency transactions, imports have to use hard currency transactions, so that there is foreign exchange risk in order to prevent the risk, can be taken to adjust the price method, the main two methods of markup and pressure to protect the value of the method through risk sharing to prevent transaction risk refers to the agreement signed by the parties to share the risk caused by changes in the exchange rate of the main process is: to determine the base price of the product and the basic exchange rate The main process is to determine the base price of the product and the basic exchange rate, determine the method and time to adjust the basic exchange rate, determine the rate of exchange rate changes based on the basic exchange rate, determine the ratio of the two sides of the transaction to share the risk of exchange rate changes, and adjust the base price of the product according to the situation Flexible control of receipt and payment time to prevent foreign exchange risks in the international financial market is changing rapidly, early or late receipt and payment, for foreign trade enterprises will produce different benefits effect Therefore, enterprises As an exporter, when the currency of denomination is strong, i.e., the exchange rate is on the rise, the more the collection date is pushed back, the more exchange rate gains can be received, so the enterprise should postpone the shipment of goods as far as possible within the performance period specified in the contract, or provide credit to foreign parties to extend the period of export bills of exchange If the exchange rate is on a downward trend, you should strive to settle the exchange rate in advance, that is, to accelerate the implementation of the contract, such as to Of course, this can only be carried out on the basis of mutual agreement, and vice versa, when the enterprise as the importer, make the corresponding adjustments due to the use of this method, the interests of the enterprise, is the loss of the foreign party, it is not easy for the foreign party to accept, but the enterprise should be aware of this, on the one hand, when the conditions can be used to avoid the risk of collecting foreign exchange, on the other hand, can prevent the foreign party to 2, external management techniques In addition to internal management techniques, enterprises have many external hedging tools available, such as forward foreign exchange contracts, foreign exchange options transactions, etc. to carry out foreign exchange transactions is a practical, direct and scientific method through forward foreign exchange transactions to prevent transaction risks in forward foreign exchange transactions, enterprises and banks to sign a contract, in which the contract provides for the name of the buyer to sell the currency, the amount, the forward exchange rate, the delivery of the currency. The amount, forward exchange rate, delivery date, etc. from the signing of the contract to the delivery of this period of time the exchange rate remains unchanged, can prevent the risk of future changes in the exchange rate forward foreign exchange transactions is a variant of forward contracts with date options, which allows enterprises to execute foreign exchange transactions on any day within a predetermined time frame of course, forward foreign exchange transactions themselves are risky, whether enterprises can avoid losses and gain benefits, the key lies in whether the exchange rate forecast is correct. The key is whether the exchange rate forecast is correct at the same time, forward foreign exchange transactions to avoid the risk of unfavorable changes in the exchange rate, but also lost the opportunity to profit from favorable changes in the exchange rate to foreign exchange options trading to prevent trading risk so-called foreign exchange options, is the foreign exchange options trading parties in accordance with the agreed exchange rate, on whether to buy a currency in the future, or whether to sell a currency option, a contract signed in advance foreign exchange Options contract to the option buyer is the right, and no obligation, options are divided into call options and put options for hedgers, foreign exchange options have three other hedging methods can not be compared to the advantages of one, the foreign exchange risk is limited to the option insurance (quotation zone) premium; second, to retain the opportunity to profit; third, to enhance the flexibility of risk management 3, analysis of existing data and develop a hedging policy Treasurer One of the biggest mistakes a treasurer or finance department can make is not working closely with their business units to look at past foreign exchange exposures No matter what type of foreign exchange exposure, it is important to ensure that risk management strategies are aligned with the overall goals of the business This also means enabling the business to avoid cash flow risk, which can jeopardize the ability of the business to pursue its strategic needs Analyzing Existing Data While foreign exchange risk management is a monotonous and manual process, it is important to understand your currency risks and monitor the way these risks are executed because foreign exchange risk management is the most difficult financial endeavor due to data integrity Therefore, analyzing available data is the most critical component of hedging Basic analysis is focused on important economic data and political news to determine the direction of currency values All currency markets are Interconnected and will help to understand the direction of current events driving the FX market economy and make better decisions Risk appetite, global stock markets and commodity markets can also affect the FX market, especially in countries where there are investment inflows and outflows Other components of fundamental analysis include, monetary policy decisions, interest rate markets and changes in tax and regulatory laws Some firms may adopt a comprehensive risk management system, especially if the level of risk is high or management has a defensive attitude toward risk A comprehensive risk and impact analysis should consider economic, regulatory and operational factors However, because the low level of risk makes the costs of a comprehensive risk management strategy outweigh the benefits, or management chooses to take a speculative approach to exchange rate movements, in both cases it is important to be proactive in developing your In both cases, it is important to be proactive in developing your hedging policy to respond to market developments and to have the right media in your firm to quickly approve hedging policies at the appropriate level. Developing a Hedging Policy Once risks have been identified and assessed, the next consideration is to determine which hedging strategies will better enable the firm to achieve its strategic objectives within its risk appetite. Once the hedging strategies have been identified, creating the content of the policy should be straightforward, as the policy should specify the hedging strategy in terms of: what financial instruments to use, who has access to them, the division of responsibilities, and how the policy will be managed and controlled, and also include reporting to senior management and the board of directors Having a sound foreign exchange strategy is critical to the success of a global enterprise Use the data available to you to data to select the approach to hedging foreign exchange that best aligns with the companys objectives