Major Project a Study of Foreign Exchange Risk Mgt
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Transcript of Major Project a Study of Foreign Exchange Risk Mgt
1.
INTRODUCTION
1.1 EXECUTIVE SUMMARY
The purpose of FX (Foreign Exchange) market is to facilitate trade and
investment. The need for a foreign exchange market arises because of the
presence of multifarious international currencies such as US Dollar, Pound
Sterling, etc., and the need for trading in such currencies. Any individual who
had a diversified portfolio or firms operating in foreign countries and trading
in foreign currencies are supposed to encounter foreign exchange risk.
Although the foreign exchange risk is volatile and the future risk
cannot be predicted but still it can be managed. This project is aimed to
expose the various types of risk involved in foreign exchange and study some
of the foreign exchange risk management tools with regarding to firms,
institutions and individuals. These tools help in measuring and minimizing the
foreign exchange risk. They are Money Market Hedging, Currency Risk
Sharing, Insurance, Derivatives, Forward Contract, Future Contract, Swaps,
Options, and Forward Rate Agreement etc.
Each of the tools is elaborated briefly with suitable examples in
relation to the risk encountered by individuals and firms in this project.
Finally, a risk is not risk if it is anticipated.
1.2 INTRODUCTION TO THE TOPIC
What Is Exchange Risk?
Exchange risk is simple in concept: a potential gain or loss that occurs
as a result of an exchange rate change. For example, if an individual owns a
share in Toyota, the Japanese company, he or she will lose if the value of the
yen drops.
Yet from this simple question several more arise. First, whose gain or
loss? Clearly not just those of a subsidiary, for they may be offset by positions
taken elsewhere in the firm. And not just gains or losses on current
transactions, for the firm's value consists of anticipated future cash flows as
well as currently contracted ones. What counts, modern finance tells us, is
shareholder value; yet the impact of any given currency change on
shareholder value is difficult to assess, so proxies have to be used. The
academic evidence linking exchange rate changes to stock prices is weak.
Moreover the shareholder who has a diversified portfolio may find that
the negative effect of exchange rate changes on one firm is balanced by gains
in other firms; in other words, that exchange risk is diversifiable. If it is, than
perhaps it's a non-risk.
Finally, risk is not risk if it is anticipated. In most currencies there are
futures or forward exchange contracts whose prices give firms an indication
of where the market expects currencies to go. And these contracts offer the
ability to lock in the anticipated change. So perhaps a better concept of
exchange risk is unanticipated exchange rate changes.
These and other issues justify a closer look at this area of international
financial management.
Should Firms Manage Foreign Exchange Risk?
Many firms refrain from active management of their foreign exchange
exposure, even though they understand that exchange rate fluctuations can
affect their earnings and value. They make this decision for a number of
reasons.
First, management does not understand it. They consider any use of risk
management tools, such as forwards, futures and options, as speculative. Or
they argue that such financial manipulations lie outside the firm's field of
expertise. Perhaps they are right to fear abuses of hedging techniques, but
refusing to use forwards and other instruments may expose the firm to
substantial speculative risks.
Second, they claim that exposure cannot be measured. They are right --
currency exposure is complex and can seldom be evaluated with precision.
But as in many business situations, imprecision should not be taken as an
excuse for indecision.
Third, they say that the firm is hedged. All transactions such as imports or
exports are covered, and foreign subsidiaries finance in local currencies. This
ignores the fact that the bulk of firm’s value comes from transactions not yet
completed, so the transactions hedging is a very incomplete strategy.
Fourth, they say that the firm does not have any exchange risk because it does
all its business in rupees (or dollar, or whatever the home currency is). But a
moment's thought will make it evident that even if you invoice German
customers in rupees, when the mark drops your prices will have to adjust or
you'll be undercut by local competitors. So revenues are influenced by
currency changes.
Finally, they emphasize that the balance sheet is hedged on an accounting
basis--especially when the "functional currency" is held to be the dollar. The
misleading signals that balance sheet exposure measure can give are
documented in later sections.
One counter-argument is that transaction costs are typically greater for
individual investors than firms. Yet there are deeper reasons why foreign
exchange risk should be managed at the firm level. Operating managers can
make such estimates with much more precision than shareholders who
typically lack the detailed knowledge of competition, markets, and the
relevant technologies. Furthermore, in all but the most perfect financial
markets, the firm has considerable advantages over investors in obtaining
relatively inexpensive debt at home and abroad, taking maximum advantage
of interest subsidies and minimizing the effect of taxes and political risk.
Another line of reasoning suggests that foreign exchange risk
management does not matter because of certain equilibrium conditions in
international markets for both financial and real assets. These conditions
include the relationship between prices of goods in different markets, better
known as Purchasing Power Parity (PPP), and between interest rates and
exchange rates, usually referred to as the International Fisher Effect (IFE).
However, deviations from PPP and IFE can persist for considerable
periods of time, especially at the level of the individual firm. The resulting
variability of net cash flow is of significance as it can subject the firm to the
costs of financial distress, or even default.
Modern research in finance supports the reasoning that earnings fluctuations
that threaten the firm's continued viability absorb management and creditors'
time, entail out-of-pocket costs such as legal fees, and create a variety of
operating and investment problems, including underinvestment in R&D. The
same argument supports the importance of corporate exchange risk
management against the claim that in equity markets it is only systematic risk
that matters. To the extent that foreign exchange risk represents
unsystematic risk, it can, of course, be diversified away provided again, those
investors have the same quality of information about the firm as management
a condition not likely to prevail in practice.
This reasoning is supported by the likely effect that exchange risk has
on taxes paid by the firm. It is generally agreed that leverage shields the firm
from taxes, because interest is tax deductible whereas dividends are not. But
the extent to which a firm can increase leverage is limited by the risk and
costs of bankruptcy. A riskier firm, perhaps one that does not hedge exchange
risk, cannot borrow as much. It follows that anything that reduces the
probability of bankruptcy allows the firm to take on greater leverage, and so
pay less taxes for a given operating cash flow. If foreign exchange hedging
reduces taxes, shareholders benefit from hedging.
However, there is one task that the firm cannot perform for
shareholders: to the extent that individuals face unique exchange risk as a
result of their different expenditure patterns, they must themselves devise
appropriate hedging strategies. Corporate management of foreign exchange
risk in the traditional sense is only able to protect expected nominal returns in
the reference currency.
Unmanaged exchange rate risk can cause significant fluctuations in the
earnings and the market value of an international firm. A very large exchange
rate movement may cause special problems for a particular company, perhaps
because it brings a competitive threat from a different country. At some level,
the currency change may threaten the firm's viability, bringing the costs of
bankruptcy to bear. To avert this, it may be worth buying
some financial instruments which may be a useful and cost-effective way to
hedge against currency risks that have very high probabilities which, have
disproportionately high costs to the company.
1.3 INDUSTRY OVERVIEW
Brokerage firms in India
Business entities that deal with stock trading are known as brokerage firms.
The Indian broking industry is one of the oldest trading industries that have
been around even before the establishment of BSE in 1875. Despite passing
through number of changes in the post liberalization period, the industry has
found its way onwards sustainable growth. With an increasing capital market
and growing number of investors, India has a number of brokerage firms. In
Indian retail brokerage industry, the brokerage firms primarily work as agents
for buying & selling of securities like shares, stocks & other financial
instruments and earn commission for each of the transactions. Indian retail
brokerage market is growing through a wonderful phase with high growth
rate. The total trading volume of Indian brokerage companies is expected to
reach US$ 6535.7 billion by the year 2015.
The 189 equity broking firms included in the study have a total of 144,346
trading terminals, 21,013 branches/ offices, and 77,125 employees across the
country. Furthermore, almost 70% of the 189 companies profiled in the
publication reported a total sub-broker base of 37,213.
The top 10 brokerage firms in India are:
Sharekhan
Terminals- 1644
Sub Brokers- NA
No. of Employees- 3879
No. of Branches- 294
India Infoline
Terminals- 173
Sub Brokers- 173
No. of Employees- NA
No. of Branches- 605
Kotak Securities Ltd
Terminals- 4320
Sub Brokers- 910
No. of Employees- 4008
No. of Branches- 350
Motilal Oswal Securities
Terminals- 7923
Sub Brokers- 890
No. of Employees- 2193
No. of Branches- 63
Angel Broking
Terminals- 5715
Sub Brokers- NA
No. of Employees- 284
No. of Branches- NA
India Bulls
Terminals- 2876
Sub Brokers- NA
No. of Employees- 5873
No. of Branches- 522
KarvyStock Broking Ltd
Terminals- 1700
Sub Brokers- 19000
No. of Employees- 3910
No. of Branches- 581
Geojit Financial Services
Terminals- 627
Sub Brokers- 247
No. of Employees- 343
No. of Branches- 314
Anand Rathi Securities Ltd
Terminals- 1527
Sub Brokers- 320
No. of Employees- 4566
No. of Branches- 220
Reliance Money
Terminals- 2428
Sub Brokers- 1494
No. of Employees- 2037
No. of Branches- 14
Com De Mar Brok AM Exp Bran
pany
mat
A/c
Ope
ning
Cha
rge
gin
Mon
ey
erag
e
Intr
aday
Deli
very
(%)
C
osur
e
(for
intra
)
ches
IIFL750/
-
5000
/-
0.05-
0.50250/-
10
times2100
Kota
k
Secur
ities
750/
-
5000
/-
0.06-
0.59360/-
4
times890
ICIC
I
Direc
t
500/
-975/-
0.07
5-
0.50
450/-5
times2124
Motil
al
Oswa
l
415/
-
Not
restri
cted
0.03-
0.30300/-
4
times430
Relig
are
299/
-
5000
/-
0.02
5-
0.25
Nil20
times1837
Angel
Broki
ng
731/
-
5000
/-
0.03-
0.30300/-
4
times120
Geoji
t
650/
-Nil
0.03-
0.30Nil
20
times500
India
Bulls
900/
-Nil
0.03-
0.30Nil
20
times718
Relia
nce
Mone
y
750/
-
Not
restri
cted
0.05-
0.2550/-
5
times
1000
0
Share
khan
750/
-
5000
/-
0.03-
0.30500/-
4
times250
HDF
C
799/
-
5000
/-
0.05-
0.50500/-
5
times650
Global Brokerage firms
1. J.P. Morgan
2. Goldman Sachs
3. Smith Barney Citigroup
4. Lehman Brothers
5. Prudential Equity Group
6. Merrill Lynch
7. Bank of America Securities
8. UBS
9. BB&T Capital Markets
10.Piper Jaffray
Financial Markets
The financial markets have been classified as
1. Cash market
2. Derivatives market
3. Debt market
4. Commodities market
Cash market, also known as spot market, is the most sought after amongst
investors.
Stock Exchanges
NSE
The National Stock Exchange (NSE) is India's leading stock exchange
covering various cities and towns across the country. NSE was set up by
leading institutions to provide a modern, fully automated screen-based trading
system with national reach. The Exchange has brought about unparalleled
transparency, speed & efficiency, safety and market integrity. It has set up
facilities that serve as a model for the securities industry in termsof systems,
practices and procedures.
NSE has played a catalytic role in reforming the Indian securities market in
terms of microstructure, market practices and trading volumes. The market
today uses state-of-art information technology to provide an efficient and
transparent trading, clearing and settlement mechanism, and has witnessed
several innovations in products & services viz. demutualization of stock
exchange governance, screen based trading, compression of settlement cycles,
dematerialization and electronic transfer of securities, securities lending and
borrowing, professionalization of trading members, fine-tuned risk
management systems, emergence of clearing corporations to assume
counterparty risks, market of debt and derivative instruments and intensive
use of information technology.
BSE
Bombay Stock Exchange is the oldest stock exchange in Asia What is now
popularly known as the BSE was established as "The Native Share & Stock
Brokers' Association" in 1875. Over the past 135 years, BSE has facilitated
the growth of the Indian corporate sector by providing it with an efficient
capital raising platform.
Today, BSE is the world's number 1 exchange in the world in terms of the
number of listed companies (over 4900). It is the world's 5th most active in
terms of number of transactions handled through its electronic trading system.
And it is in the top ten of global exchanges in terms of the market
capitalization of its listed companies (as of December 31, 2009). The
companies listed on BSE command a total market capitalization of USD
Trillion 1.28 as of Feb, 2010.
BSE is the first exchange in India and the second in the world to obtain an
ISO 9001:2000certifications. It is also the first Exchange in the country and
second in the world to receive Information Security Management System
Standard BS 7799-2-2002 certification for its BSE On-Line trading System
(BOLT). Presently, we are ISO 27001:2005 certified, which is a ISO version
of BS 7799 for Information Security.
The BSE Index, SENSEX, is India's first and most popular Stock Market
benchmark index. Exchange traded funds (ETF) on SENSEX, are listed on
BSE and in Hong Kong. Futures and options on the index are also traded at
BSE.
Regional stock exchanges in India
There are 23 stock exchanges in India. Among them two are national level
stock exchanges namely Bombay Stock Exchange (BSE) and National Stock
Exchange of India (NSE). The rest 21 are Regional Stock Exchanges (RSE).
AhmedabadStock Exchange
BangaloreStock Exchange
BhubaneshwarStock Exchange
CalcuttaStock Exchange
CochinStock Exchange
CoimbatoreStock Exchange
DelhiStock Exchange
GuwahatiStock Exchange
HyderabadStock Exchange
JaipurStock Exchange
LudhianaStock Exchange
Madhya PradeshStock Exchange
MadrasStock Exchange
MagadhStock Exchange
MangaloreStock Exchange
Meerut Stock Exchange
OTC Exchange Of India
Pune Stock Exchange
Saurashtra KutchStock Exchange
UttarPradeshStock Exchange
VadodaraStock Exchange
Regulatory body for Indian Securities market (SEBI)
In 1988 the Securities and Exchange Board of India (SEBI) was established
by the Government of India through an executive resolution, and was
subsequently upgraded as a fully autonomous body (a statutory Board) in the
year 1992 with the passing of the Securities and Exchange Board of India Act
(SEBI Act) on 30th January 1992.
The basic objectives of the Board were identified as:
To protect the interests of investors in securities;
To promote the development of Securities Market;
To regulate the securities market and
For matters connected therewith or incidental thereto.
Some insights of this industry
1. Around 17% equity broking companies have 80% of broking terminals
Equity broking terminals consisting of NEAT, BOLT and CTCL licenses are the
key in determining the size of an equity broking company. According to our study,
17% of the 189 profiled companies have 80% of the total trading terminals
provided by such companies.
2. New kids on the block
A majority of the 189 broking firms featured in this publication (approximately
85%) entered the business in the decade following 1990s. The financial sector
reforms, which commenced in that decade, opened up opportunities in the
securities markets, especially for new entrants.
3. Employee break-up
4. More than 50% of companies are engaged in three market segment
5. Western region has highest number of companies
6. NSE has a share of 66% among total shares traded
7. NSDL witnesses surge in dematerialized shares
8. Volatility in stock markets
In FY10, the global stock markets displayed lesser volatility compared with
FY09. Month-wise, average daily volatility in the Indian benchmark indices
was the highest in May 2009. The lowest volatility in the benchmark indices
was noticed during Mar 2010. The annualised volatility of BSE Sensex
decreased from 43.6% in FY09 to 29.2% in FY10. A similar trend was also
observed for the S&P CNX Nifty, which recorded annualised volatility of
29.4% in FY10, compared with 41.5% the previous year.
9. Overall profit of broking companies soar; small companies see a turnaround
Net profit of broking companies
2.2COMPANY OVERVIEW (INDIA INFOLINE)
The IIFL (India Infoline) group, comprising the holding company, India
Infoline Ltd (NSE: INDIAINFO, BSE: 532636) and its subsidiaries, is
one of the leading players in the Indian financial services space. IIFL
offers advice and execution platform for the entire range of financial
services covering products ranging from Equities and derivatives,
Commodities, Wealth management, Asset management, Insurance, Fixed
deposits, Loans, Investment Banking, Gold bonds and other small savings
instruments. IIFL recently received an in-principle approval for Securities
Trading and Clearing memberships from Singapore Exchange (SGX)
paving the way for IIFL to become the first Indian brokerage to get a
membership of the SGX. IIFL also received membership of the Colombo
Stock Exchange becoming the first foreign broker to enter Sri Lanka.
IIFL owns and manages the website, www.indiainfoline.com, which is
one of India’s leading online destinations for personal finance, stock
markets, economy and business.
IIFL has been awarded the ‘Best Broker, India’ by FinanceAsia and the
‘Most improved brokerage, India’ in the AsiaMoney polls. India Infoline
was also adjudged as ‘Fastest Growing Equity Broking House - Large
firms’ by Dun & Bradstreet. A forerunner in the field of equity research,
IIFL’s research is acknowledged by none other than Forbes as ‘Best of
the Web’ and ‘…a must read for investors in Asia’. Our research is
available not just over the Internet but also on international wire services
like Bloomberg, Thomson First Call and Internet Securities where it is
amongst one of the most read Indian brokers.
A network of over 2,500 business locations spread over more than 500
cities and towns across India facilitates the smooth acquisition and
servicing of a large customer base. All our offices are connected with the
corporate office in Mumbai with cutting edge networking technology.
The group caters to a customer base of about a million customers, over a
variety of mediums viz. online, over the phone and at our branches.
History & Milestones
2011
Launched IIFL Mutual Fund.
2010
Received in-principle approval for membership of the Singapore Stock
Exchange.
Received membership of the Colombo Stock Exchange
2009
Acquired registration for Housing Finance
SEBI in-principle approval for Mutual Fund
Obtained Venture Capital license
2008
Launched IIFL Wealth
Transitioned to insurance broking model
2007
Commenced institutional equities business under IIFL
Formed Singapore subsidiary, IIFL (Asia) Pvt. Ltd
2006
Acquired membership of DGCX
Commenced the lending business
2005
Maiden IPO and listed on NSE, BSE
2004
Acquired commodities broking license
Launched Portfolio Management Service
2003
Launched proprietary trading platform Trader Terminal for retail customers
2000
Launched online trading through www.5paisa.com Started distribution of life
insurance and mutual fund
1999
Launched www.indiainfoline.com
1997
Launched research products of leading Indian companies, key sectors and the
economy Client included leading FIIs, banks and companies
1995
Commenced operations as an Equity Research firm
IIFL (India Infoline Ltd) - Corporate Structure
Board of directors
Mr. Nirmal Jain is the founder and Chairman of India Infoline Ltd. He is
a PGDM (Post Graduate Diploma in Management) from IIM (Indian Institute
of Management) Ahmedabad, a Chartered Accountant and a rank-holder Cost
Accountant. His professional track record is equally outstanding. He started
his career in 1989 with Hindustan Lever Limited, the Indian arm of Unilever.
During his stint with Hindustan Lever, he handled a variety of
responsibilities, including export and trading in agro-commodities. He
contributed immensely towards the rapid and profitable growth of Hindustan
Lever’s commodity export business, which was then the nation’s as well as
the Company’s top priority.
He founded Probity Research and Services Pvt. Ltd. (later re-christened India Infoline) in
1995 perhaps95; perhaps the first independent equity research Company in India. His work
set new standards for equity research in India. Mr. Jain was one of the first entrepreneurs in
India to seize the internet opportunity:witht with the launch of www.indiainfoline.com in
1999. Under his leadership, India Infoline not only steered through the dotcom bust and one
of the worst stock market downtrends but also grew from strength to strength.
Mr. R.Venkataraman, Managing Director ,India Infoline Ltd
Mr. R. Venkataraman, Co-Promoter and Managing Director of India Infoline
Ltd, is a B.Tech (electronics and electrical communications engineering, IIT
Kharagpur) and an MBA (IIM Bangalore). He joined the India Infoline Board
in July 1999. He previously held senior managerial positions in ICICI Limited,
including ICICI Securities Limited, their investment banking joint venture with
J P Morgan of US, BZW and Taib Capital Corporation Limited. He was also
the Assistant Vice President with G E Capital Services India Limited in their
private equity division, possessing a varied experience of more than 19 years in
the financial services sector.
Vision:
To be the ‘most respected company in the financial services space’.
Mission:
To educate, empower, enrich and enhance customer investment skills set through
research, knowledge and delightful service.
Values:
Team Work
Mutual Respect
Execution
Transformation
Transparency
Accountability
SWOT ANALYSIS
The Company is uniquely positioned as a supplier of High Chrome Mill Internals
on a global scale, on account of the following competitive strengths:
Focus on the combination of Metallurgy, Design and Applications.
Comprehensive solutions based approach, as distinct from supply of
commodity products.
Focus on technology research and development.
Worldwide presence in more than 60 countries, being directly in front of the
customers through a network of overseas marketing Subsidiaries in the
Middle East, Europe and USA and warehouse facilities.
Low cost of production.
A management team comprising of Technocrats, Professionals and
Consultants having rich experience in High Chrome Mill Internals industry.
WEAKNESS/THREATS
Inability to scale up the capacities rapidly owing to extremely high
importance of absolutely zero failure rate of the products expected by
the customers, requiring close monitoring of the quality.
Issues related to logistics, particularly with the increasing volumes of the
products.
Current global slowdown in the cement Industry-particularly in the EU
and USA-which may impact the short term performance of the
Company.
The focus on the Global Mining Industry may lead to pressure on the
margins in the short term due to the typical entry related competitive
factors.
Lack of a banking arm to complete the bank broker-depository chain.
OPPORTUNITIES AND STRATEGIES
To maintain and further strengthen our capabilities of Research &
Development activity.
To consider tapping the significant opportunity offered by China as a
Market for the mill internals consumed by the Cement and Utility
Industry.
To focus more on strategic relationship/ commercial partnerships with
international groups.
CHAPTER 3
RESEARCH DESIGN
RESEARCH DESIGN
INTRODUCTION
Foreign exchange risk is the exposure of a company’s financial strength to the
potential impact of movements in foreign exchange rates. The risk is that adverse
fluctuations in exchange rates may result in a reduction in measures of financial
strength. It is acknowledged that specific foreign exchange risk practices may differ
among banks depending upon factors such as the institution’s size, and the nature
and complexity of its activities. However, a comprehensive foreign exchange risk
programme should deal with, at a minimum, good management information
systems, contingency planning and other managerial and analytical techniques.
TITLE OF THE STUDY
“ A STUDY ON FOREIGN EXCHANGE RISK MANAGEMENT”
STATEMENT OF THE PROBLEM
The main role of the exchange rate is to allow international regulations related to
international trade: an exporter wants to be paid in foreign currency, because they
need currency to pay its employees or its suppliers, while the importer does not have
a priori that its own currency to pay. Every time there is an international commercial
transaction, there will be a foreign exchange transaction.
The exchange rate fluctuations will affect the prices of export goods. For example,
if a product sold in France and the USA is 100 €, with an exchange rate of $ 1.25
per euro, therefore it will cost $ 125 (100 x 1.25) to U.S. consumers . A decline in
the exchange rate at $ 1.10 per euro will drop the export price at 110 € (100 x 1.10),
while a rise in the exchange rate will rise. Conversely, a well made in the USA, sold
in France and worth $ 100, cost 80 € (100 / 1.25) to French consumers in the first
case and 90.10 € (100 / 1.10) in the second case. Thus, any decline in the exchange
rate of the national currency promotes exports and imports disadvantage, and vice
versa for an increase in the exchange rate. So there is a possibility for a country to
improve its balance of trade (and hence growth) if it gets a drop in the value of its
currency. Countries that consistently under-estimate their currencies to facilitate
their exports are accused of making monetary protectionism.
To prevent this form of protectionism that countries may agree on a system of fixed
exchange rates - such as the Bretton Woods (1944-1971) or the European Monetary
System (1979-1992). But some economists point out that a flexible exchange system
allows you to balance trade. The reasoning is based on the functioning of the foreign
exchange market. If a country has a deficit in its current payments, this means that
the country lacks foreign currency to pay for purchases with the rest of the world,
and must be requested in the foreign exchange market which lowers the value of its
currency in relation to other currencies. Accordingly, the exchange rate of the
national currency down, which encourages exports and restricts imports, which,
ultimately, the foreign trade balance. The mechanism is reversed in case of current
account surplus.
PURPOSE OF THE STUDY
The purpose of FX market is to facilitate trade and investment. The need for a
foreign exchange market arises because of the presence of multifarious international
currencies such as US Dollar, Pound Sterling, etc., and the need for trading in such
currencies.
Foreign exchange, or forex, is critical to transact international business. Foreign
exchange refers to the process of trading domestic for foreign currency at
fluctuating exchange rates. Foreign exchange markets have been established to
facilitate this process. Private citizens, traders, and government officials all monitor
the foreign exchange market carefully to gauge the implications of particular
currency values upon the world economy. You should identify foreign exchange
risks, before making financial decisions.
3.1 OBJECTIVES OF THE STUDY
This project attempt to study the complexities of the foreign exchange market. The
purpose of this study is to get a better idea and comprehensive details of foreign
exchange risk management.
SUB OBJECTIVES
To know about the various concept and technicalities in foreign
exchange.
To study the various types of risks related to foreign exchange when a firm,
institution, individual is exposed to deal with foreign currencies.
To get the knowledge about the traditional risk management tools such as
Money Market Hedging, Currency Risk Sharing, Insurance, Derivatives,
Forward Contract, Future Contract, Swaps, Options, Forward Rate
Agreement etc.
These and other issues justify a closer look at the area of Foreign Exchange
Risk Management.
LIMITATION OF THE STUDY
Time constraint
Resource constraint.
Bias on the part of interviewer
SOURCE OF DATA
The sources of data may be classified into primary sources and secondary source.
a) Primary Data:
The primary data was collected through interviews of professionals and
observations.
b) Secondary Data:
The secondary data was collected from books, newspapers, other
publications and internet and browses taken from the company.
DATA ANALYSIS
The data analysis was done on the basis of the information available from various
sources and brainstorming.
.