Foreign Exchange
Foreign Exchange risk management has always been an area look up by people from varied fields, weather literary or profession related matter. For the purpose of this paper I gone through few literary works to understand the whole concept and formulate my paper, a distinct one.
Collier and Davis (1985) in their study about the organization and practice of currency risk management by U.K. multi-national companies. The findings revealed that there is a degree of centralized control of group currency risk management and that formal exposure management policies existed. There was active management of currency transactions risk. The preference was for risk-averse policies, in that automatic policies of closeout were applied.
Batten, Metlor and Wan (1992) focused on foreign exchange risk management practice and product usage of large Australia-based firms. The results indicated that, of the 72 firms covered by the Study, 70% of the firms traded their foreign exchange exposures, acting as foreign exchange risk bearers, in an attempt to optimize company returns. Transaction exposure emerged as the most relevant exposure.
Jesswein et al, (1993) in their study on use of derivatives by U.S. corporations, categorizes foreign exchange risk management products under three generations: Forward contracts belonging to the First Generation; Futures, Options, Futures- Options, Warranties and Swaps belonging to the Second Generation; and Range, Compound Options, Synthetic Products and Foreign Exchange Agreements belong to the Third Generation. The findings of the Study showed that the use of the third generation products was generally less than that of the second-generation products, which was, in turn, less than the use of the first generation products. The use of these risk management products was generally not significantly related to the size of the company, but was significantly related to the company's degree of international involvement.
Phillips (1995) in his study focused
Collier and Davis (1985) in their study about the organization and practice of currency risk management by U.K. multi-national companies. The findings revealed that there is a degree of centralized control of group currency risk management and that formal exposure management policies existed. There was active management of currency transactions risk. The preference was for risk-averse policies, in that automatic policies of closeout were applied.
Batten, Metlor and Wan (1992) focused on foreign exchange risk management practice and product usage of large Australia-based firms. The results indicated that, of the 72 firms covered by the Study, 70% of the firms traded their foreign exchange exposures, acting as foreign exchange risk bearers, in an attempt to optimize company returns. Transaction exposure emerged as the most relevant exposure.
Jesswein et al, (1993) in their study on use of derivatives by U.S. corporations, categorizes foreign exchange risk management products under three generations: Forward contracts belonging to the First Generation; Futures, Options, Futures- Options, Warranties and Swaps belonging to the Second Generation; and Range, Compound Options, Synthetic Products and Foreign Exchange Agreements belong to the Third Generation. The findings of the Study showed that the use of the third generation products was generally less than that of the second-generation products, which was, in turn, less than the use of the first generation products. The use of these risk management products was generally not significantly related to the size of the company, but was significantly related to the company's degree of international involvement.
Phillips (1995) in his study focused