Foreign Exchange Risk Management - A Case Study
Foreign Exchange Risk Management - A Case Study
GROUP-6
DUSHYANT|LALITHA|APARNA|MANASA|RAHUL|SANTHOSH|USHA|ABHIRUP|JYOTHI
One of the most difficult and persistent problems for the firms exposed to forex risk
Current exchange rates are favourable for exports but imports are working out to
be pricey.
Indian IT sector export oriented sector which requires frequent management and
measurement of exchange rate risk.
Analysis of the forex exposure and its management of TCS Technologies Ltd.
ALPA DHANANI(2003)
BRNGT PRAMBORG(2005)
Empirical evidence :- There is a positive relationship between bank size & foreign
exchange exposure: ERIC WRONG (2008)
Reason:- Larger banks tends to have more significant foreign exchange
operations & trading positions.
Larger banks also have more businesses with large and international
corporations of which competitiveness & sensitivity to exchange rates
movements
BIANCA DE POLI & JENS SINDERGAARD (2009)
Examined the properties of foreign exchange rate risk premium in a canonical
general equilibrium small open economy model.
Features assure that not only risk aversion but also precautionary savings are
counter-cycle.
Helps generate forex risk premium that co-varies negatively.
TIGRAN POGHOSYAN (2010)
Provides the first empirical evidence on the relationship between US macroeconomic variables, international oil prices & foreign exchange risk in GCC
countries.
Analysis performed using stochastic discount factor methodology impose no
arbitrage relationship on the risk premium and its theoretically grounded
macroeconomic determinants.
Estimation result suggested macroeconomic development in US constitute
Indian IT sector
Particulars
Percent of
export sales
2011
2010
91.84
91.02
92.18
Foreign Currency
USD
PS
AUD
Currency option
contract (Rs in crores)
218.5
21.75
21.0
3.0
29.56
14.66
18.64
3.34
Hedging instruments are initially measures at fair value and are remeasured
at subsequent reporting dates.
Conclusion
Based on the data, it can inferred that the exposure of next 8 years
can be hedged through foreign currency forwards and options
Thank You