A Study on Empirical Analysis of Exchange Rate Risk Exposure on Businesses and their Value Change by using Forward Exchange and Covered Interest

The aim of this study is to assess the exchange rate risk associated with the Tunisian public debt portfolio through Value-at-Risk (VaR) methodology. We use daily spot exchange rates of the Tunisian dinar against the three main debt currencies, the dollar, the euro and the yen. Our period of interest is from 02/01/2004 to 31/12/2008. Thetas and Marginal VaR analysis reveal that Japanese yen is the most risky currency constituting the Tunisian public debt portfolio. American dollar appears as a source of risk for the Tunisian external debt but remains less risky than the yen, while, the euro constitutes a hedge currency for exchange risk management associated with the Tunisian public debt portfolio.

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Hedging Transaction and Economic Exposure: A Solution for PT Pura Daya Prima

Journal of Applied Finance & Accounting ◽

10.21512/jafa.v1i2.123 ◽

2009 ◽

Vol 1 (2) ◽

pp. 227-246

Author(s):

Ita Puspitasari Mulyono ◽

Michael Suhardianto ◽

Raymundus Parulian Sihotang

Keyword(s):

Exchange Rate ◽

Foreign Exchange ◽

Mitigation Strategy ◽

Risk Exposure ◽

Exchange Rate Risk ◽

Financial Instruments ◽

Financial Loss ◽

Doing Business ◽

Rate Risk ◽

Hedging Policy

Many companies use more than one currency in doing business, which make them being exposed to exchange rate risk fluctuation. Accordingly, the Company’s financial manager needs to understand how to measure the risk exposure in order to determine when and how to protect the company from the risk. PT Pura Daya Prima (PDP) is one of that companies which has long been concerned on how to mitigate its economic and transaction exposure. The purpose of this project is to help the company mitigate its risk exposure and find the best hedging technique or other mitigation strategy to minimize their risk. The result of the project is to determine the most favorable hedging policy and the best way to implement the financial instruments or products available in the market or simulated. It is expected that PT Pura Daya Prima would be able to quickly execute hedging techniques in order to prevent financial loss due to foreign exchange exposure.

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The Exchange-Rate Risk Exposure of Asset Returns

The Journal of Business ◽

10.1086/209710 ◽

1997 ◽

Vol 70 (1) ◽

pp. 105 ◽

Cited By ~ 166

Author(s):

Edward H. Chow ◽

Wayne Y. Lee ◽

Michael E. Solt

Keyword(s):

Exchange Rate ◽

Asset Returns ◽

Risk Exposure ◽

Exchange Rate Risk ◽

Rate Risk ◽

The Exchange Rate

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Export, Exchange Rate Risk and Hedging: The Duopoly Case

German Economic Review ◽

10.1111/j.1468-0475.2011.00531.x ◽

2011 ◽

Vol 12 (4) ◽

pp. 490-502 ◽

Cited By ~ 7

Author(s):

Udo Broll ◽

Jack E. Wahl ◽

Christoph Wessel

Keyword(s):

International Trade ◽

Exchange Rate ◽

Risk Exposure ◽

Exchange Rate Risk ◽

Cournot Duopoly ◽

Forward Market ◽

Rate Risk

Abstract This paper studies a Cournot duopoly in international trade with firms exposed to exchange rate risk. A hedging opportunity is introduced by a forward market on which one firm can trade the foreign currency.We investigate two settings: First, we assume that hedging and output decisions are taken simultaneously. It is shown that hedging is exclusively done for risk-managing reasons as it is not possible to use hedging strategically. Second, the hedging decision is made before the output decisions. We show that hedging is not only used to manage the risk exposure but also as a strategic device.

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