scholarly journals Financial Instruments to Address Renewable Energy Project Risks in India

Energies ◽  
2021 ◽  
Vol 14 (19) ◽  
pp. 6405
Author(s):  
Gireesh Shrimali
Keyword(s):  
Foreign Exchange ◽  
Public Funding ◽  
Cash Flows ◽  
Counterparty Risk ◽  
Financial Instruments ◽  
Foreign Exchange Risk ◽  
Theory To Practice ◽  
Exchange Risk ◽  
Project Risks ◽  
Funding Mechanisms

This paper provides a summary of financial instruments to address two biggest risks to renewable projects in India. These risks include the following: first, off-taker (or counterparty) risk, which relates to payment delays by public-sector distribution companies to independent power producers, which then impact project level cash flows in the domestic currency; second, currency (or foreign exchange) risk related to currency fluctuations, which impact foreign investor level cash flows in foreign currencies. This paper then describes multiple solutions for each of these risks, using public funding mechanisms. For payment delays, the category of solutions is termed Payment Security Mechanisms; whereas, for currency fluctuations, the category of solutions is termed Foreign Exchange Hedging Facilities. The coverage in this paper shows the evolution of the solutions from theory to practice over time. These solutions are likely to be applicable to other developing countries.

scholarly journals Effect of Foreign Exchange Risk Hedging Techniques on Financial Performance of Listed Firms in Kenya

2018 ◽  
Vol 8 (3) ◽  
pp. 156 ◽  
Author(s):  
Monica Wanjiru Muiru ◽  
Sifunjo E. Kisaka ◽  
Fredrick Kalui
Keyword(s):  
Financial Performance ◽  
Foreign Exchange ◽  
Cash Flows ◽  
Least Square ◽  
Currency Hedging ◽  
Foreign Exchange Risk ◽  
Listed Firms ◽  
Risk Hedging ◽  
Hedging Strategies ◽  
Exchange Risk

The adoption of floating foreign exchange rate regime in the 1990s and international trade have led to increased exposure of Kenyan firms to foreign exchange risk. Foreign exchange risk can affect a firm’s expected cash flows, and by extension, its financial performance. This paper examines the effects of foreign exchange risk hedging techniques on the financial performance of publicly listed firms in Kenya. The target population constituted all the 54 firms that were continuously listed on the Nairobi Securities Exchange during the study period, from 2011 to 2016. The study used panel data research design. Secondary data was obtained from financial statements of the listed firms. The data was coded and analysed using descriptive and inferential statistics—correlation and regression—with the aid of STATA software. The feasible generalised least square model was used to test the hypotheses. The results show currency hedging has a positive effect on financial performance. This implies that when hedging strategies and hedging tools are implemented appropriately, they help firms achieve their financial objectives, increasing financial performance, hence creating value for shareholders.

scholarly journals An Analysis of Foreign Exchange Risk Management: Techniques Employed in Indian Pharma Industry

2019 ◽  
Vol 8 (1) ◽  
pp. 92-107
Author(s):  
Prakash Basanna ◽  
K. R. Pundareeka Vittala
Keyword(s):  
Risk Management ◽  
Foreign Exchange ◽  
Cash Flows ◽  
Foreign Exchange Risk ◽  
Futures Options ◽  
Currency Derivatives ◽  
Exchange Risk ◽  
Currency Exposure ◽  
Current Article ◽  
Exchange Risk Management

Foreign exchange risk management (FERM) involves using both internal and external techniques such as forwards, futures, options, and swaps that are called as currency derivatives. The firms with greater growth opportunities and tighter financial constraints are more inclined to use currency derivatives. The Forex market provides various derivative instruments to hedge against currency exposures such as currency forwards, options, futures, and swaps. The current article aims at studying various FERM techniques used in the Indian pharmaceutical industry and its impact on exchange gain/losses. For this purpose, foreign exchange cash flows arising out of imports and exports and exchange gain/losses of the companies during 2010–2017 of 10 sample companies chosen from the pharma industry are used. It is observed from the study that only two currencies—USD and EUR—hold command in the forex market and other currencies are being used minimally. It is also noted that there are several currency derivatives available to the business firms such as forwards, futures, options, and swaps for hedging currency exposure. However, among all these techniques, forward contract is considered to be an effective hedging tool and easier to understand.

scholarly journals Foreign exchange transaction exposure of enterprises in Serbia

2016 ◽  
Vol 61 (209) ◽  
pp. 161-177
Author(s):  
Jasmina Bogicevic ◽  
Ljiljana Dmitrovic-Saponja ◽  
Marija Pantelic
Keyword(s):  
Foreign Exchange ◽  
Management Practices ◽  
Foreign Currency ◽  
Negative Impact ◽  
Practical Importance ◽  
Cash Flows ◽  
Foreign Exchange Risk ◽  
Exchange Rate Fluctuations ◽  
Exchange Risk ◽  
Foreign Enterprises

Enterprises involved in international business face transaction exposure to foreign exchange risk. This type of exposure occurs when an enterprise trades, borrows, or l?nds in foreign currency. Transaction exposure has a direct effect on an enterprise?s financial position and profitability. It is one of the three forms of exposure to exchange rate fluctuations, the other two being translation exposure and operating exposure. The aim of this paper is to assess the transaction exposure of enterprises in Serbia operating internationally. In addition to identifying and measuring transaction exposure, this paper explores the practical importance that enterprises in Serbia attach to management of this type of foreign exchange risk. We do not find significant differences between domestic and foreign enterprises in their choice of the type of foreign exchange risk exposure to manage. Although transaction exposure is the most managed type of foreign exchange risk, research has shown that, compared to foreign businesses, Serbian enterprises do not use sufficient protective measures to minimize the negative impact of this type of exposure on their cash flows and profitability. We expected that there would be a statistically significant dependence between the volume of enterprises? foreign currency transactions and the level of applied transaction exposure management practices. However, the results of our research, based on a sample of enterprises in Serbia operating internationally, show that transaction exposure management practices can be influenced by factors other than the level of an enterprise?s foreign currency transactions, such as the enterprise?s country of origin.

Sign in / Sign up

Export Citation Format

Share Document