Currency risk and risk management

• Номер работы:
  440895
• Раздел:
  Все работы   →   Дипломные работы   →   Финансовый менеджмент, финансовая математика
• Год добавления:
  30.04.2017 г.
• Объем работы:
  41 стр.
• Содержание:
  TABLE OF CONTENT
  
  INTRODUCTION 3
  CHAPTER 1. CONCEPT OF CURRENCY RISK. FINANCIAL INSTRUMENTS FOR MANAGEMENT OF CURRENCY RISK 4
  1.1 Definition of currency risk 4
  1.2 Factors of currency risk 4
  1.3 Classification of currency risk 7
  CHAPTER 2. ANALYSIS OF CURRENCY RISK MANAGEMENT IN COMMERCIAL BANK «SPAREBANKEN SOR» 13
  2.1 Characteristic of «Sparebanken Sor» 13
  2.2 Financial analysis of activity of bank «Sparebanken Sor» 15
  2.3 Currency risk management in bank «Sparebanken Sor» 20
  2.4 Quantitative assessment of currency risk of bank «Sparebanken Sor» by «Value-at-Risk» method 26
  2.5 Directions of minimization of currency risk 35
  CONCLUSION 40
  REFERENCES 42
  APPENDICES 45
  Appendix 1 – Profit and loss account of «Sparebanken Sor» 46
  Appendix 2 – Balance sheet of «Sparebanken Sor» 47
  
  
• Выдержка из работы:
  Некоторые тезисы из работы по теме Currency risk and risk management
  INTRODUCTION
  
  The aim of this research is to investigate how currency risk management by using fi-nancial instruments contributes to the company/enterprise to achieve the desired currency ex-posure. In the conditions of the world globalization which is shown in deregulation of national economies, decrease or even lack of restrictions for capital flow, exchange rate is one of the main sources of uncertainty. Importance of an exchange rate steadily increases in the modern world as his high volatility affects not only financial results of economic entities, but also is the predetermining factor at making decisions on an entry into the foreign markets or imple-mentation of investments into foreign assets (Brooks, 2016). For example, according to the experts, during crisis of 2008, 30-40% of the income of the companies, about 30% of the in-come or losses from an investment of investors in foreign actions and about 60% of invest-ments into bonds have been corrected in connection with change of exchange rates. It is also possible to give an example with Russia: events of 2014 during which the Russian currency has depreciated for more than 100% have proved an unprecedented role of exchange rates in the economic sphere of life of corporations and the population. Because of currency risk there was a decrease in consumer ability of citizens and the income of the Russian and foreign cor-porations, the termination of business activity of the foreign companies in Russia.
  Currency risks have gained special importance from the moment of falling of the Bret-ton Woods currency system at the beginning of the 70th years of the XX century and transi-tion to new system - system of floating exchange rates.
  Change of currency systems became a source of enormous uncertainty at decision-making of both financial and non-financial sector by the companies. In addition to it, in the 1970th years there was a paradigm shift of economic thinking from Keynesianism to monetar-ism which cornerstone need of constant control by money supply is that results in instability of interest rates and volatility of exchange rates. However, it would be incorrect to think that until transition to system of floating exchange rates the currency risk was absent at all. For example, currency risks were present at the gold standard (The Parisian and Genoa currency systems), but were minimum as the exchange rate fluctuated in a narrow framework of "gold points". At the Bretton Woods system, periodic official devaluations and revaluations
  ..............
  CHAPTER 1. CONCEPT OF CURRENCY RISK. FINANCIAL INSTRUMENTS FOR MANAGEMENT OF CURRENCY RISK
  
  1.1 Definition of currency risk
  
  Many foreign scientists-economists, investigating currency risk, offered various defi-nitions (Adrian, Etula, Groen, 2011; Apergis, Artikis, Sorros, 2011; Brown, 2001; Cenedese, Sarno, Tsiakas, 2014; Kocenda, Poghosyan, 2009; Kolari, Moorman, Sorescu, 2008; Krapl, Giaccotto, 2015; Marshall, 2000; Muller, Verschoor, 2007; Sirr, Garvey, Gallagher, 2011). The majority of the determination of this category existing in economic literature is based on a prerequisite that the only thing of emergence of currency risk change of an exchange rate is decisive factor, as has been displayed in definitions. However, the currency risk can also arise in connection with certain actions of public authorities (for example, introduction of adminis-trative restrictions for values in a foreign currency or implementation of currency interventions by the central banks).
  For development of full determination of currency risk, it is necessary to study duality of currency risk. It is debatable, but integral characteristic of currency risk. The prevailing majority of available determination of risk in economic literature in general, currency risk in particular mark out with the key characteristic of risk danger that associates risk only with emergence of negative consequences. However, the risk represents also a possibility of a posi-tive outcome (for example, receiving additional profit), and this is why we are going to study currency risk as dualistic category.
  Thus, the currency risk is a probability of realization of one or several events in con-nection with change of exchange rates or actions of public authorities which object are the currency values leading to positive or negative change of an economic situation of the subject of enterprise activity.
  ......