Effects of Foreign Exchange Derivatives and Foreign Currency Denominated Debt on Corporate Values : Focusing Chinese Auto Parts Manufacturers

2021 ◽  
Vol 25 (1) ◽  
pp. 199-214
Author(s):  
Zheng Liu ◽  
Tae-joong Kim
Keyword(s):  
Foreign Exchange ◽  
Foreign Currency ◽  
Corporate Values ◽  
Auto Parts

scholarly journals Exchange Rates and Liquidity Risk

2020 ◽  
Vol 11 (2) ◽  
pp. 159
Author(s):  
Martin D.D. EVANS
Keyword(s):  
Risk Factors ◽  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Currency ◽  
Liquidity Risk ◽  
Risk Premia ◽  
Time Varying ◽  
Foreign Exchange Risk ◽  
Exchange Risk

I use Forex trading data to study how risks associated with the lack of liquidity contribute to the dynamics of 17 spot exchange rates through their time-varying contributions to risk premia. I find that liquidity risk matters. All the foreign exchange risk premia compensate investors for exposure to liquidity risk; and, for many currencies, exposure to liquidity risk appears to be more important than exposure to the traditional carry and momentum risk factors. I also find that variations in the price of liquidity risk make economically important contributions to the behavior of individual foreign currency returns: they account for approximately 34%, on average, of the variability in currency returns compared to the contribution of approximately 8% from the prices of carry and momentum risk.

scholarly journals HEDGING CURRENCY RISKS IN INTERNATIONAL BUSINESS USING THE OPPORTUNITIES OF THE INTERNATIONAL FOREIGN EXCHANGE MARKET

2021 ◽  
Author(s):  
Olena Liegostaieva
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
International Business ◽  
Foreign Exchange Market ◽  
Foreign Currency ◽  
Exchange Market ◽  
Currency Risk ◽  
Exchange Rate Fluctuations ◽  
Current Value ◽  
Financial Result

The article is devoted to the study of currency risk hedging in international business. The article notes that the international foreign exchange market is the largest and fastest growing of all world markets. The characteristic features of the international currency market are substantiated and offered. It is also noted that foreign exchange transactions provide economic ties between participants located on different sides of state borders: settlements between firms from different countries for the supply of goods and services, foreign investment, international tourism and business travel. It is determined that hedging of currency risks is the protection of funds from the unfavorable movement of exchange rates, and is carried out in fixing the current value of funds by concluding an agreement on the foreign exchange market. When hedging, the risk of exchange rate changes disappears, and this makes it possible to forecast the company's activities and see the financial result, which is not distorted by exchange rate fluctuations, which will allow you to determine product prices, calculate profits, etc. The main difference between hedging and other types of transactions is that its purpose is not to generate additional profits, but to reduce the risk of potential losses, as risk reduction is almost always necessary to pay, hedging, of course, involves additional costs. Hedging is a way to improve business planning. An enterprise wishing to use this service shall pledge the specified amount, from which losses on its positions will be deducted. In today's conditions, thanks to the foreign exchange market, there is a very reliable way to hedge currency risk. This method is to fix the current value of funds by concluding agreements in this market. With hedging, the company eliminates the risk of exchange rate fluctuations, and this allows you to forecast activities and see the financial result, which is not changed by exchange rate fluctuations. Allows you to pre-determine product prices, determine profits, etc. Thus, the principle of hedging in international business is to open a currency position in a foreign currency account for future transactions to convert funds.

Part III Investment Banking, 14 Trading Book—Models

2018 ◽  
Author(s):  
Gleeson Simon
Keyword(s):  
Interest Rate ◽  
Foreign Exchange ◽  
Foreign Currency ◽  
Credit Derivatives ◽  
Investment Banking ◽  
Market Risk ◽  
Equity Derivatives ◽  
Regulated Firms ◽  
Before And After ◽  
Basel 3

The key to market risk is the calculation of position risk requirement (PRR). Basel 3 has radically changed the approach to the calculation of position risk for regulated firms, and this chapter deals with the ‘before and after’ element to it. A firm must calculate a PRR in respect of all its trading book positions, all foreign exchange positions, and all positions in commodities (including physical commodities) whether or not in the trading book. A firm must also be able to monitor its total PRR on an intra-day basis. The remainder of the chapter covers trading book eligibility under Basel 2.5, trading and market exposures, equity PRR and basic interest rate PRR for equity derivatives, commodity PRR, foreign currency PRR, option PRR, credit derivatives, and underwriting positions.

The impact of exchange volatility exposure on firms’ foreign-denominated debts

2019 ◽  
Vol 57 (11) ◽  
pp. 3035-3060 ◽  
Author(s):  
Yujuana Min ◽  
Oh Suk Yang
Keyword(s):  
Risk Management ◽  
Foreign Exchange ◽  
Foreign Currency ◽  
Management Strategies ◽  
Foreign Exchange Risk ◽  
Content Type ◽  
Exchange Risk ◽  
Foreign Exchange Exposure ◽  
Foreign Exchange Volatility ◽  
Exchange Risk Management

Purpose This research began by acknowledging that conventional analysis on the foreign exchange exposure could not adequately reflect firms’ risk management strategies, which firms take actions against uncertainties raised by foreign exchange. In order to conceptualize uncertainty aroused by foreign exchange, the purpose of this paper is to develop an index that could measure corporate profits’ sensitivity to foreign exchange uncertainty and examine its possibility of utilization. Design/methodology/approach As an alternative to foreign exchange exposure, the present research derived the foreign exchange volatility exposure and analyzed the determinants of foreign currency-denominated debt in terms of foreign exchange volatility exposure. The foreign exchange volatility exposure draws from partially differentiating a firm’s operating profits to the exchange rate volatility. Findings The major findings are as follows. First, before the Asian financial crisis, South Korean enterprises had similar responses to the exchange volatility exposure as compared with the exchange exposure on procuring foreign-denominated debt. Second, since the global financial crisis (GFC), not only have Korean firms’ response mechanisms to both exposures changed, but also the significance of exchange volatility exposure has been further emphasized. Furthermore, Korean companies have dealt with exchange uncertainties by decreasing foreign-denominated debt as their foreign exchange volatility exposure increased after GFC. In contrast, the influence of conventional exchange exposure on foreign-denominated debt has diminished. Research limitations/implications Future research should focus on several points. First, additional research could extend to foreign investors who have divergent perception and consideration in regard to foreign exchange risk management. Second, research on decision making and motivation in foreign currency choice should be conducted in order to deepen academic understanding. Third, research that refines the variables added in the current research should be conducted. Finally, as a way to manage foreign exchange volatility exposure, further investigation based on this study is possible. Practical implications The results of this study have several important theoretical and empirical implications for companies’ foreign exchange risk management strategy. First, through foreign exchange volatility exposure, which can usefully take over the role of the existing foreign exchange exposure, the authors can confirm market uncertainty as being relevant to the foreign exchange risk management strategy. Second, through the financial influence that the foreign exchange volatility exposure has on the foreign currency-denominated debt, the authors can observe the Korean firms’ paradigm shifts in their foreign exchange risk management strategies. Originality/value This research confirms the importance of foreign exchange volatility exposure in the research works dealing with firms’ exchange risk management, also the possible influence of foreign exchange volatility exposure in the future might be increased as uncertainty is raised from foreign exchange escalating.

Non-Usury Bank Corporation (NUBankCo): The Solution to Islamic Banking

2019 ◽  
Vol 2 (1) ◽  
pp. 53-66
Author(s):  
Bijan Bidabad
Keyword(s):  
Corporate Governance ◽  
Foreign Exchange ◽  
Foreign Currency ◽  
Financial Institution ◽  
Precious Metals ◽  
Behavioral Model ◽  
Islamic Banking ◽  
Currency Exchange ◽  
Financial Characteristics ◽  
Conventional Banks

In this paper, we are going to introduce a new Islamic financial institution with elaborated economic and financial characteristics. «Non-Usury Bank Corporation» (NUBankCo) is defined in a way that depositors are the shareholders of the Bank. This corporation is a new kind of shared ownership corporation which its shareholders are deposit holders and their deposits work as corporation’s equities. The defined bank can perform non-usury operations, and by designing a behavioral model, it is shown that NUBankCo can draw an environment that the welfare of society is to be maximized. Mobility of deposit resources in NUBankCo is less than conventional banks, and there are fewer conflicts between large and small shareholders/depositors and limits the emergence of shareholders’ cartels and thus huge sudden outflow of funds which creates bankruptcy crises.OECD’s corporate governance criteria are completely adaptable to this bank. Other pronouncements like Basel, AAOFI, IFSB, and FSF can be applied to this bank. NUBankCo can be established in different countries and can be adapted to different monetary, banking, foreign exchange, and commercial laws and regulations and can coexist in competition with conventional banks.NUbankCo will be Islamic in deposit mobilization side and will be Islamic in the loan/credit side for certain Islamic contracts and banking operations. Foreign currency exchange operations, bonds, commercial papers, and precious metals transactions, cash and draft operations, and credit and beneloan (non-interest loan) operations are characterized for NUBankCo to be fully Islamic.

Foreign Currency Derivatives and Foreign Exchange Rate Exposure Management of KOSDAQ Firms

2013 ◽  
Vol 21 (2) ◽  
pp. 223-254
Author(s):  
Taek Ho Kwon
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Currency ◽  
Foreign Exchange Rate ◽  
Sufficient Evidence ◽  
Similar Data ◽  
Test Results ◽  
Crisis Period ◽  
Exchange Rate Exposure ◽  
Currency Derivatives

This study examines the foreign currency derivatives trading of KOSDAQ firms and analyses the relations of derivatives trading and foreign exchange rate exposure in the period 2005~2010. The amount of derivatives trading reaches 27.7% of total assets for the trading firms before global financial crisis period (2005~2007). While, the amount decreases to 17.6% of total assets during the crisis period (2008~2010). These amounts are much greater than those of KOSPI firms which are calculated using similar data specification and periods. The variables which are usually adopted as determinants of derivatives trading do not explain the usage of derivatives in the analysis of period 2005~2007. These results suggest that KOSDAQ firms use derivatives not only foreign exchange risk managements but also trading purposes during this period. Test results do not show sufficient evidence that KOSDAQ firms use derivatives trading in an effective manner to manage foreign exchange rate exposure. In sum, test results suggest that to achieve the goal of managing foreign exchange rate exposure firms should estimate their open position in foreign currency properly before conducting foreign currency derivatives trading.

scholarly journals Uprawnienia kredytobiorcy zaciągającego kredyt denominowany lub indeksowany do waluty innej niż polska w świetle ustawy antyspreadowej

Ekonomia ◽  
2018 ◽  
Vol 24 (1) ◽  
pp. 39-56
Author(s):  
Magdalena Paleczna ◽  
Edyta Rutkowska-Tomaszewska
Keyword(s):  
Exchange Rate ◽  
Foreign Exchange ◽  
Foreign Currency ◽  
Consumer Credit ◽  
Competitive Position ◽  
Credit Facility ◽  
Currency Exchange ◽  
Currency Exchange Rate ◽  
Credit Law ◽  
Credit Contract

Rights of the borrower committing denominated or indexed loan in a foreign currency in light of the Anti-spread ActIn 2004–2008 banks offered consumer denominated loan in a foreign currency, which was a competitive position in relation to a PLN credit facility. Banks had not informed about foreign exchange differences, therefore had caused increase in household indebtedness. Banks also had reserved that consumer has to buy currency only from the bank-lender. In 2011 the Anti-spread Act was adopted, which amended banking law and consumer credit law. Creditors were obligated to inform consumer about rules of determining the manners and dates of fixing the currency exchange rate on the basis of which in particular the amount of credit, its tranches and principal and interest instalments are calculated, and the rules of converting into the currency of credit disbursement or repayment. That information and information about the rules of opening and operating the account shall be concluded in a credit contract. Borrower can repay principal and interest instalments and prepay the full or partial amount of the loan directly in that currency.

scholarly journals PENGEMBANGAN SISTEM INFORMASI JASA PENUKARAN VALAS

2020 ◽  
Vol 5 (1) ◽  
pp. 7-12
Author(s):  
Anzaludin Samsinga Perbangsa ◽  
Aloysius Reyner ◽  
Joshua Christian Nugroho ◽  
Junne J
Keyword(s):  
Exchange Rates ◽  
Foreign Exchange ◽  
Foreign Currency ◽  
Foreign Exchange Rates ◽  
Literature Study ◽  
Web Based ◽  
Analysis And Design ◽  
Biometric Security ◽  
To Come

The role of money changers is very important in meeting the needs of foreign exchange for the community. This role can also be fulfilled by banks and other financial institutions. People who want to order foreign currencies at this time still have to go through traditional procedures, where the buyer is required to come directly to the place of foreign exchange. This study intends to build a system design that can make currency orders and provide information on foreign exchange rates contained in each money changer through a web-based application. This research uses the Object Oriented Analysis and Design (OOAD) method, literature study, and data collection methods using a questionnaire. Based on the problems outlined and the results of the study, this system can be a source of information on foreign exchange rates and also an alternative order for foreign exchange. Foreign exchange orders can be made online through this information system. This system will continue to be developed with various features such as payment methods using biometric security methods with the support of Artificial Intelligence (AI) technology. So users can search for foreign currency values and order them easily through online media.

scholarly journals Analysis of economic and statistical indicators of entrepreneurship development in Ukraine

2021 ◽  
Vol 2 (98) ◽  
pp. 69-80
Author(s):  
V., Ulanchuk ◽  
◽  
S. Sokolyuk ◽  
E. Zharun ◽  
N. Koroteev ◽  
...  
Keyword(s):  
Small Business ◽  
Foreign Exchange ◽  
Labor Migration ◽  
Foreign Exchange Market ◽  
Foreign Currency ◽  
State Regulation ◽  
Economic Losses ◽  
Small Enterprises ◽  
Economic Activities ◽  
Competitive Situation

The purpose of the article is to statistically assess the internal indicators of small business and analytical confirmation of the identified trends in their development to ensure the objectivity of information flows on the state and role of small business in the economy of Ukraine. A modern feature of the development of entrepreneurship in the economy of Ukraine is the growth of self-employment and mass labor migration. According to the results of the static assessment, it was found that the receipt of foreign currency in the form of remittances of labor migrants became a source of formation of the foreign exchange market, as their size is 30% of revenues from exports of goods from Ukraine. However, the amount of economic losses in the economy of Ukraine due to labor migration is much higher than foreign exchange earnings and is 6 % of total sales (goods and services) in Ukraine. Small business accumulated 48 % of the total number of employees in the economy of Ukraine, which turned it into a powerful politically and socially influential formation. The economic capacity of the small business remains traditionally low. In the structure of the country's economy, small enterprises (80 % of the total number of enterprises) bring only 19 % of income to the economy. The burden of the single tax for small enterprises is identical to the burden of paying income tax on medium-sized enterprises, which indicates relatively equal tax conditions for small and medium-sized businesses in Ukraine. Responsibility and autonomy of enterprises for the development and management decisions is growing extremely nowadays, what should provide further effectiveness of their activities. Ensure effective management is possible only through a comprehensive analysis and diagnostics business enterprise that meets modern requirements of economic development. The competitive situation in which today must engage in economic activities domestic enterprises of any form of ownership and industry sector is quite unstable, shaky, unpredictable and completely devoid of adverse external factors. Therefore, the company appears quite vulnerable to unlimited competitive space, and lack of improved methods of state regulation and favorable policy protectionism deepens an already tough situation. In such circumstances, company cant relied on anyone except themselves, involving the activity of experienced professionals that can simulate variable development of the company in a competitive environment and to predict the consequences of any move made by management in the form of decisions

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