- •Table of content
- •Introduction
- •Introduction to theoretical Background
- •1.2. Forex
- •1.2.1 Defining of Forex
- •1.2.2 History of Forex
- •1.2.3 Forex market participants
- •1.2.4 Daily turnover in Forex market
- •1.2.5 Types of exchange rate
- •Managed float regime
- •4). Free float regime
- •1.3.6 Factors, that effect to foreign exchange
- •1.3.7 Foreign exchange transactions
- •Forward transaction
- •Options
- •Futures
- •1.3 Risk management
- •1.3.1 The history of the theory of risk management
- •1.3.2 Defining of risk management
- •1.3.3 Foreign exchange risk
- •1.3.4 Types of foreign exchange risk
- •1.3.8 Foreign Exchange Risk Management
- •1.3.9 Stages and methods Foreign Exchange Risk Management
- •1.3. 10 Methods to reduce the foreign exchange risk
- •1.3.11 Methods of insurance from foreign currency risks
- •1. Балабанов и.Т. «Риск-менеджмент» – Москва.: Финансы и статистика, 1997.
- •1. Жуков е.Ф. «Банки и банковские операции» – Москва.: юнити, 1997.
- •1.3.12 Problems of foreign exchange risk management
1.3.2 Defining of risk management
A widely used vocabulary for risk management is defined by ISO Guide 73, "Risk management. Vocabulary.
Risk management is the identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. Risks can come from uncertainty in financial markets, project failures (at any phase in design, development, production, or sustainment life-cycles), legal liabilities, credit risk, accidents, natural causes and disasters as well as deliberate attack from an adversary, or events of uncertain or unpredictable root-cause.
From article A.Chalov: Risk management. Part 1. Theory defined as:
Risk management - a system of control, method and way to neutralize the impact of risk on financial performance.
http://www.russian-trader.com/forums/content/41-chalov-risk-management
http://en.wikipedia.org/wiki/Risk_management
1.3.3 Foreign exchange risk
Foreign exchange risks are part of the business risks to which participants in international economic relations.
Foreign exchange risk - the risk of loss when buying or selling foreign currencies at different rates.
Currency risk or the risk of exchange losses associated with the internationalization of banking operations, the creation of transnational (cooperative) enterprises and banking institutions and the diversification of their activities and represents the possibility of financial loss as a result of currency fluctuations.
The change in foreign exchange rates in relation to each other is due to many factors, for example, due to changes in the intrinsic value of currencies, the constant overflow of cash flows from country to country, speculation, etc.
A key factor characterizing any currency is the degree of confidence in the currency of residents and non-residents. Confidence in the currency difficult a multifactorial criterion consisting of several indicators
For example: indicator of confidence in the political regime of the degree of openness and liberalization of the economy and the exchange rate regime, the export-import balance of the country, macroeconomic fundamentals and investors' faith in the stability of the country's development in the future.
Currency risks - the risk of foreign exchange losses related to the change:
Foreign exchange rate relative the domestic currency during the foreign trade, credit, foreign exchange transactions in the stock and commodity markets.
In the presence of open foreign exchange position. For exporters and importers of foreign exchange risk arises when a foreign currency prices for their currency. Exporter loses money at lower rate of price in relation to its national currency in the period between signing the contract and making the payment on it. For importing damages arise in the opposite movement of the course. In both cases, the equivalents of unsustainable currency will be different from the disadvantageous side of the amounts that are expected to importer exporter at the time of signing the contract. Exposed to currency risk debtors and creditors when a loan or debt expressed in foreign currency for them, including government agencies and banks.
Exposed to foreign exchange risk and official foreign exchange reserves of the country.
In terms of pre-monopoly capitalism, under the gold standard currency risks were minimal and did not have a significant impact on international economic relations in connection with the fact that exchange rates have been relatively stable and not subject to frequent change. Under monopoly capitalism, the deepening of the general crisis of capitalism, including in the field of monetary, exchange rate risks have increased. In a Bretton Woods monetary system under a regime of fixed parities and exchange currency risks were caused by periodic official devaluations and the revaluations. With the transition to the regime of floating exchange rates, foreign exchange risks have increased. Currency risks complicate international trade and credit relations.
Котелкин С.В и др. Основы международных валютно- финансовых и кредитных отношений: Учебник / С.В. Котелкин, А.В. Круглов, Ю.В. Мишальченко, Т.Г. Тумаров .- М.: Инфра-М,2004