International Journal of Economics, Finance and Management Sciences

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Hedging Foreign Exchange Risk Exposure by Importer Companies

Received: 20 August 2015    Accepted: 01 September 2015    Published: 11 September 2015
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Abstract

The study was conducted in order to disclose the Foreign Exchange (FX) rate risk faced by every importer company. The paper investigates FX risk hedging strategy using forwards versus floating strategy in terms of minimizing total importing costs. The study exposes real-life costs of hedging strategies using forwards comprising theoretical foundations as well as practical implementation example based on real company data. The main question to be answered in the paper is whether it is beneficial to hedge with FX forwards or it is better to float FX exposure.

DOI 10.11648/j.ijefm.20150305.14
Published in International Journal of Economics, Finance and Management Sciences (Volume 3, Issue 5, October 2015)
Page(s) 435-440
Creative Commons

This is an Open Access article, distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution and reproduction in any medium or format, provided the original work is properly cited.

Copyright

Copyright © The Author(s), 2024. Published by Science Publishing Group

Keywords

Probability Distribution, Pearson’s Chi-squared Test, Monte Carlo Simulation, Forward Contracts, Foreign Exchange

References
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[10] J. C. Hull, “Risk Management and Financial Institutions”, 2nd ed., Pearson, 2010
[11] G. L. Gastineau, D. J. Smith, and R. Todd, “Risk Management, Derivatives, and Financial Analysis under SFAS No. 133”, The Research Foundation of AIMR and Blackwell Series in Finance, 2001.
[12] M. A. Petersen, and S. R. Thiagarajan, “Risk Management and Hedging: With and Without Derivatives”, Financial Management, 29, 4 (Winter 2000): 5-30.
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Author Information
  • Department of Finance, American International University-Bangladesh, Dhaka, Bangladesh

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  • APA Style

    Kazi Rashedul Hasan. (2015). Hedging Foreign Exchange Risk Exposure by Importer Companies. International Journal of Economics, Finance and Management Sciences, 3(5), 435-440. https://doi.org/10.11648/j.ijefm.20150305.14

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    ACS Style

    Kazi Rashedul Hasan. Hedging Foreign Exchange Risk Exposure by Importer Companies. Int. J. Econ. Finance Manag. Sci. 2015, 3(5), 435-440. doi: 10.11648/j.ijefm.20150305.14

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    AMA Style

    Kazi Rashedul Hasan. Hedging Foreign Exchange Risk Exposure by Importer Companies. Int J Econ Finance Manag Sci. 2015;3(5):435-440. doi: 10.11648/j.ijefm.20150305.14

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  • @article{10.11648/j.ijefm.20150305.14,
      author = {Kazi Rashedul Hasan},
      title = {Hedging Foreign Exchange Risk Exposure by Importer Companies},
      journal = {International Journal of Economics, Finance and Management Sciences},
      volume = {3},
      number = {5},
      pages = {435-440},
      doi = {10.11648/j.ijefm.20150305.14},
      url = {https://doi.org/10.11648/j.ijefm.20150305.14},
      eprint = {https://download.sciencepg.com/pdf/10.11648.j.ijefm.20150305.14},
      abstract = {The study was conducted in order to disclose the Foreign Exchange (FX) rate risk faced by every importer company. The paper investigates FX risk hedging strategy using forwards versus floating strategy in terms of minimizing total importing costs. The study exposes real-life costs of hedging strategies using forwards comprising theoretical foundations as well as practical implementation example based on real company data. The main question to be answered in the paper is whether it is beneficial to hedge with FX forwards or it is better to float FX exposure.},
     year = {2015}
    }
    

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