Author: Lu Weiyang (1981.11-), male, Dongyang, Zhejiang, Tianjin University School of Management Accounting Profession 2006 students in the seminar Master, research direction: International Financial Management and Practice of foreign exchange.
Abstract: Since 2002, 5 consecutive years, China's foreign trade has maintained rapid growth of more than 20% of first half of 2007 reached 980.93 billion U.S. dollars, continued to No. 3 ranked globe, foreign trade, foreign exchange risk exists must be managed effectively. Based on the exchange rate risks do a brief first volume, indicating the status of management of exchange rate risk, and through the use of financial engineering empirical analysis of foreign exchange risk management of foreign trade enterprises.
key words: financial engineering; foreign trade enterprises; foreign exchange risk
abstract: since 2002, the export and import amount has been risen with arapid rate above 20% annually.the amount in this first half year is about $ 980.93 us dollars.the foreign exchange risk in foreign trade should be effectively managed.at first, the concept of exchange rate risk has been briefly introduced.then the current situation current situation and existing problems of management of exchange rate risk is analyzed and elaborated.on this basis, the financial engineering in the application of evading the exchange rate risk faced by foreign trade enterprises has been probed into in the way of positive analysis.
key words: financial engineering; foreign trade enterprises; exchange rate risk
According to customs statistics, premature ejaculation, the first half of 2007, import and export value was 980.93 billion U.S. dollars, up 23.3 year on year %, if the retention rate of 20% according to plan, foreign trade enterprises in the first half off about 15,000 billion RMB exchange face greater exchange rate risk. Since 2002, China's foreign trade has continued to insist on more than 20% 5-year high-speed increase exchange rate risk will also be added along with the future.
a foreign exchange risk management, foreign exchange risk
overview and meaning, also known as exchange rate risk refers to the micro-economic entities engaged in foreign economic movement, debt denominated in foreign currencies or liability caused by changes in exchange rates related to the value of land or loss caused or increased. to foreign exchange risk faced by foreign trade enterprises, the main can be divided into three types: transaction risk, accounting, translation risk and economic risk. the economic risk is Because changes in exchange rates affect the number of sales, prices and costs so that the business risk of a change in balance of payments. the economic stakes are numerous and spread to corporate finance, sales, production and other aspects. Therefore, the economic risks of the various parts of the enterprise should be a unique take. Accounting risk is the disposal of enterprises in accounting and foreign currency debt, debt accounts, the cost of currency conversion on all the necessary foreign currency-denominated items that occur when assessing risk. accounting translation risk arising from the enterprise accounts at the causes of balance sheet and income statement due to exchange rate movements in some subjects and in unstable condition, while enterprises in the preparation of financial statements can only use their own currencies. so that corporate accounting statements for different subjects need to be converted into foreign currency balance the balance of local currency denominated, specific changes in exchange rates fluctuations would lead to strange statements, which led to too large or too small assessment. trading risk refers to the foreign currency transactions, because the exchange rate fluctuations lead to business accounts receivable and debt should be held on the value change risk. This is the most important foreign trade enterprises face foreign exchange risk, the enterprise after the signing of trade contracts, foreign currency denominated cash flows simply be sure, the exchange rate changes will affect the calculation of local currency cash flows. < br> to avoid exchange rate risk in practice, the coherence of the main changes in the nominal exchange rate only in the context of risk management for trading, this paper is to explore the management of transaction risk.
since the early 70s since the collapse of the Bretton Woods system, West began to withdraw foreign exchange controls diverse country, to take a floating exchange rate system, frequent fluctuations in currency exchange rates, stable amplitude, a variety of important currencies such as dollars, yen, euros, pounds is often present between the strong and weak position of mutual transformation of the situation. in China , especially since the July 21, 2005, the RMB exchange rate is no longer pegged to the U.S. dollar, start to perform the basic market supply and demand with reference to a basket of currencies, managed floating exchange rate rail system, enterprises will increasingly take greater foreign exchange exposure risk. this reform, our government will no longer be a complete exchange rate risk, followed by a continuous appreciation of the RMB exchange rate system reform and the deepening of China's foreign trade enterprises have been forced to progress in financial and foreign exchange rate risk aversion.
Second, China's foreign exchange risk management status
present, China's financial derivatives market development is also commensurate with immature, and foreign exchange related financial derivative instruments is even more scarce. the emergence of financial derivatives in China not long, only ten years history of the foreign exchange market is the main financial derivatives are forward foreign exchange transactions, forward foreign exchange settlement, foreign exchange swaps.
1992 �� 7 months, foreign exchange futures exchange in Shanghai, the first mediation center launched in Beijing after commodity exchanges futures exchange rate also appeared in the business (the U.S. dollar). The product is made with the yuan trading security payments, settlement of the transaction gains and losses, due for delivery contracts can be said that this is a disguised form of foreign exchange futures. the introduction of currency futures The market is always sluggish investment transactions, end of the year, only a mere $ 216,260,000 turnover, yet not cope spot market volume week, next year this situation has not changed .1993 July, the State Administration of Foreign Exchange issued a tell, the request has been established all over the body to be stagnant foreign exchange transactions, the registration review is limited to foreign exchange futures in Guangzhou, Shenzhen, Shanghai's financial institutions, and import and export enterprise for the purpose of payment and foreign exchange hedging, not speculative transactions, corporate and individual foreign exchange transactions must be cash, non-speculative fictitious operations. under stricter control in this predicament, not long after the official end of the foreign exchange futures are running the pilot.
1997 �� 1 �� National Bank of China announced Interim Measures for the forward exchange settlement and sales operations, Trade Bank open this business .2004 February 4, China Banking Regulatory Commission announced a companies, financial leasing companies, auto finance corporate, and national bank branch in China) may apply to the application for the China Banking Regulatory Commission established to monitor derivatives transactions, derivatives transactions include forwards, futures, swaps ( exchange), and the existence of long-term options, futures, swaps (exchange) with the option of one or more features in the structure of financial instruments.
2005 �� 7 �� 21 onwards China began to implement a market-based reference to a basket of currencies, a managed floating exchange rate system. exchange rate reform, China to accelerate foreign exchange market, perfect and expand the main body of the RMB forward transactions and scope of August 15, 2005 launch of the China Foreign Exchange Trading away the core of foreign exchange transactions to meet the reform of RMB exchange rate system, the same year they launched a foreign exchange swaps and other financial derivatives.
of business management and financial staff on financial derivatives is absolutely strange, for lack of awareness of the foreign exchange market volatility, many potential did not cause the risks of high regard, enterprises and even fluctuations in exchange rates are a matter of course, this exchange rate fluctuations to domestic enterprises have been repeatedly violated. At the same time the foreign exchange market in China is far from perfect, the spot market is still underdeveloped, small volume , foreign exchange forward transactions and swap transactions are only part of the present in the retail market, the interbank foreign exchange forward market does not exist, and options on futures and forward foreign exchange market, so there is no suitable for corporate use of financial derivatives exchange risk management external environment.
Third, the use of financial engineering, foreign exchange risk management of foreign trade enterprises Empirical Analysis of
can trade foreign exchange risk is, you can smooth commodity, has its own value and the market. based on the level of economic entities on the risk appetite different economic agents can be divided into those who risk appetite, risk averse, the risk of breaking those. A major advantage of the financial engineering area is to avoid foreign exchange risk. financial engineering have to do is to risk and return preferences in different between the transfer and allocation, risk never were willing to risk hedging the risk transferred to the happy tune with those who suffered, or who transfer from the concentration of risk or evacuated to other investors. In a way, At this point in the larger financial institutions will bear a larger context of the risks and obligations.
foreign trade enterprises to use financial engineering to avoid foreign exchange risk is basically subject to the following criteria: at a certain cost, to keep the exchange rate fluctuations on the currency minimize economic losses, only losses from the reduction in foreign exchange risks are greater than the benefits paid to reduce the cost of risk, financial engineering is meaningful risk prevention programs, feasible, and the Guangzhou office furniture.
financial engineering tools mainly refers to financial derivatives, divided into the following four categories: forwards, futures, swaps, options. for foreign exchange risk, financial engineering construction enterprises to use financial derivative instruments, there are two main selection: one is through selling foreign exchange risk source, with a determination to replace the risk of forward foreign exchange contracts, foreign exchange futures contracts, currency swap contracts are able to do some degree of importers and exporters of qualitative supply of financial instruments; the other is for the payment by the amount of the purchase insurance, the risk of exclusion of self-defeating, has a favorable risk retained in the most exemplary financial instruments is currency options contracts. the following choices from both left, with cases of financial engineering in the field of foreign trade enterprises to avoid the application of foreign exchange risk .
(a) to replace the risk with certainty - Forward foreign exchange contracts, foreign currency futures contracts and currency swap contracts
1, long-term contracts outside the will. Forward foreign exchange transactions between the parties that agreed to by the a specific future date, according to the agreed currency, exchange rate and the amount of the settlement. forward foreign exchange transactions have the following type of two varieties: one is the forward foreign exchange transactions on schedule, the delivery date fixed; the other is scheduled for forward foreign exchange transaction, that delivery date is not fixed, allowing enterprises in a predetermined time to perform on any day within the scale of foreign exchange transactions.
Analysis: I have a set of import and export of equipment imported from Germany, to be paid in three months money ? 2,000,000. If the company did not hedge this foreign exchange risk to take any measures, but wait until after three months of the spot exchange rate to buy two million euros, then once the RMB against the euro, the symbol of the company will pay more quantitative currency to buy foreign exchange. In order to avoid loss of exchange rate changes to the company a possibility, the company can take advantage of forward exchange contracts to buy fixed-price three months after the delivery of the euro.
Similarly, if I import and export company engaged in an export business in a foreign currency to pay for the goods received in a period of time competence, then the import and export companies will face a net foreign exchange position. To avoid foreign exchange risks, the companies can sell long-term foreign currency gains .
, of course, import and export companies can partially hedge the way, for example, 50% of the purchase price for the hedge, which will halve the foreign exchange risk.
practice in foreign trade operations, foreign trade enterprises are sometimes due to ship date do not understand the causes such as the date payment is not sure at this time, you can choose the bank entered into forward exchange contracts. In this case, the Bank will assume greater risks, so the import and export companies have to pay the cost of comparable high. Forward foreign exchange contracts can be selective so that importers and exporters within the period specified in the contract options expiration date, to lock in exchange rates within a certain period of risk, in order to achieve the purpose of avoiding risk.
2, foreign exchange futures contracts. Futures is means the two parties signed an agreement to license one time in the future to a given exchange rate from the other party agreed to buy a certain amount of foreign exchange.
foreign exchange futures contract is in fact the standard form of forward foreign exchange contracts, the difference is with the scope and scale of the contract, a fixed maturity date, traded on exchanges. because of foreign exchange futures contracts and forward foreign exchange contracts very similar, for the use of foreign exchange futures to avoid foreign exchange risk in foreign trade business, in this, not repeat them.
3, the currency swap contracts. currency exchange, also known as currency swaps, is the two parties signed the agreement, approved a series of periodic payments between the principal springs of different goods and capital.
currency swap transactions for individual steps How much has the following steps: �� the opening exchange of the principal. that is the beginning of the swap transaction, two parties exchange rate according to the agreement of the principal two different currencies. �� interest rate swaps. that parties to the transaction at an agreed rate of interest the principal outstanding based on interest rate swap transaction to pay for. �� payment due once again the Japanese exchange. that the expiry date of the swap contract, parties to the transaction in exchange for the principal amount of the opening transaction.
empirical analysis : b at home and abroad enterprises to import from a rental situation in large machines and equipment, supply will always be a top issue clothing operators, clothing stores to find sources is accompanied. lease loans in the amount of euros, and now I begin to talk about how I lose weight the right thin waist, the loan conditions are: 3-year period, from the first time began to pay interest every six months, the interest rate fixed; principal from the first year of law began to equal pay, pay once a year. However, the enterprise income mostly from the dollar and the RMB, if the euro rebounded sharply against the dollar, companies will bear the heavy debt burden.
a bank is found in the international market trends participate in the transaction and more than a prerequisite for the transaction price opponent, and designed for the enterprise, the exchange rate risk aversion a practical plan: �� a temporary pad bank dollars, U.S. companies will sell, spot buying euros, the amount of loan principal of proportionality in the lease. �� Enterprise commissioned a Syrian bank to do a euro against the dollar to a fixed interest rate swap fixed-rate currency swaps installments, for the buying of euros to buy in U.S. dollars. for-dollar income for the repayment of advances by a bank. spot transactions and mutual Closing Date for the transaction as a unity day, so that banks do not actually advance to prevent credit risks. �� to the half-yearly interest payment date, the company used its own funds through a U.S. bank interest paid to counterparties, while income to the counterparty to pay interest on the euro, interest on loans used to pay rental. �� to the annual also today, the company used its own funds through a bank payment to the counterparty that sector dollars to repay the principal. also receive a counterparty should be paid to the principal repayment of that part of the euro, the provisions for repayment of loan repayment of lease that part of the euro principal. Thus, the principal transactions and loans to gradually reduce the residual pay until all.
the import enterprises currency swap will be replaced by the euro dollar loans loan debt changing from one currency into another currency, a great victory to avoid foreign exchange risk.
currency swaps to effectively regulate the currency structure of assets and liabilities, the conversion of foreign currency debt-based currency debt, to avoid the field of trade finance to exchange rate fluctuations.
(b) to dispel the risk of self-defeating, remain on the already favorable risk - foreign exchange options contracts
foreign exchange option contracts is Buyers have the option on or before the due date in the contract agreement by a certain amount of a foreign currency exchange trading rights to the assets. foreign exchange options contracts is the power given to the option buyer, not the task of the contract the buyer can exercise the option on or before the due date, or abandoned the implementation of choice options. Indeed, the buyer was to obtain such a right must be paid to Seller's expense, the cost of insurance premiums or options.
empirical analysis: a consignment to be imported foreign trade companies, the company will be in three months after the payment to the foreign exporters $ 5,000,000, assuming only this time holding the hands of the yen, foreign trade companies, and the strong yen, a weaker dollar. the company's future financial staff analyzes foreign exchange movements and speculation: one month , due to the United States will take a series of measures to improve the trade balance, which the U.S. dollar may appreciate, the company should buy as soon as possible on the dollar in the spot market, so in the future exchange rate changes brought about by the growth in import costs. But taking into account the financial staff many factors affect the foreign exchange market, foreign exchange is difficult to correctly predict the trend after three months. Therefore, the resolution of financial staff to buy dollars in foreign exchange options approach.
trading content: buy USD $ 5,000,000 call option agreement
Price: $ 1: ? 100
option expense: 1.0 yen / dollar
option period: 3 months
if a month later, the U.S. trade balance turned to further improvement, the dollar exchange rate rose $ 1 more than 105 yen, to buy the company to exercise the right to 1:100 dollar bought 500 million, its profit and loss situation is as follows:
actual financing capital: 500t (100 1) = 5.05 �� ��Ԫ
cost than the current price frugal: 500t (105-101) = 2000 �� ��Ԫ
if within three months, the dollar to 1 U.S. dollar = 95 yen, the company can waive the option, buying U.S. dollars at market exchange rates, only 475 million yen, coupled with premium five million yen, a total of just 480 million yen, to save 020 million yen.
If during this period, the dollar has not changed, the foreign company can exercise the option can also give up options, and direct purchase of U.S. dollars at market exchange rates, the maximum loss is the option premium, but 5 million yen, did not experience any loss of exchange rate changes.
this way, the company pays a premium in adverse changes in exchange rates to avoid risks and achieve long-term preservation purposes; a favorable change in the exchange rate, not only can effectively overcome the limitations of forward foreign exchange hedging, but also may obtain a larger income.
the other hand, there are far foreign exchange earnings of exporters, to pay a premium by buying put options, foreign exchange risk in the lock, while a favorable exchange rate changes can keep the profits when the opportunity to achieve their maximum benefit.
foreign trade companies, foreign exchange options can be due to exchange rate movements may cause the risk of infinite loss transferred to the seller of the option, the purpose of arrival to avoid exchange rate risk. There are three other preservation methods compare the strengths of frustration: first, the foreign exchange risk to foreign trade enterprises limited to the option premium; Second, foreign trade enterprises can save the profit opportunities; Third, strengthen risk management of foreign trade enterprise mobility.
these cases is nothing but only in the foreign exchange risk management, financial engineering of the most simple use. financial engineers can apply the financial engineering of the structure and composition, the actual situation of the United importers and exporters of traditional products and derivative financial arrangement and combination products, such as swap options, futures, options, etc., development, design a new financial instruments and wrist, satisfied the needs of a variety of risk management.
that has ceased to participate in language
wto, trade and economic development of our country has brought great opportunities, but also making China's foreign trade enterprises, the special is still lessons remain in the blind based on the subjective resolution of any foreign exchange risk on its nature, based on the precautionary approach does not use any state-owned foreign trade enterprises, to prevent foreign exchange risk has become imminent in the sooner the better.
today's world, Western countries have relaxed or even abolition of exchange controls, frequent fluctuations in international foreign exchange market exchange rate and amplitude, in the world set off a wave of financial ease in the tide once and for all foreign exchange risk, facing domestic and foreign trade enterprises the huge losses caused by foreign exchange fluctuations possible. full of urgent need to develop financial engineering, adequate and effective use of financial engineering to solve day foreign exchange risk.
Indeed, the development of financial engineering, must be fully appropriate to the country's financial and economic state of the facts China is in the era of economic transition, financial engineering is not just pure combination of financial and skills, but should be a new concept and the reform of financial effectiveness point of view.
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[3] Jiang Yuqing. multinationals and foreign exchange risk management [j]. Financial Securities, 2006; (9): 91 ~ 92
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