Author(s)

Qiaoyun Cai ¹

Affiliation(s)

¹ College of Humanities and Foreign Languages, China Jiliang University, Hangzhou, Zhejiang, 310018, China

Corresponding Author

Qiaoyun Cai

ABSTRACT

With the development of the times, enterprise exchange rate risk has gradually been taken seriously by enterprises. The foreign exchange risk of a company is related to changes in its profitability, net cash flow, and market value. The change in exchange rate not only affects the business performance of enterprises, but also has a significant impact on the national economy. Therefore, how to control the exchange rate risk of enterprises is the focus of research that enterprises need to focus on today. This article studied the use of financial derivatives for foreign exchange risk management, thus aiming to improve the efficiency of enterprise exchange rate risk management through financial derivative tools. This article investigated the proportion of companies engaged in hedging business among listed companies over a period of time through experiments. It could be seen that the proportion reached 4.89% in 2017 and 5.84% in 2018. This indicated that the number of physical enterprises using hedging business for risk management was still increasing, which proved that financial derivatives were indeed very helpful for enterprise exchange rate risk management.

KEYWORDS

Risk Management; Exchange Rate Risk; Hedging; Financial Derivatives

CITE THIS PAPER

Qiaoyun Cai, Application of Financial Derivatives in Enterprise Exchange Rate Risk Management. Financial Engineering and Risk Management (2023) Vol. 6: 56-63. DOI: http://dx.doi.org/10.23977/ferm.2023.060408.

REFERENCES

[1] Dvorsky J, Belas J, Gavurova B. Business risk management in the context of small and medium-sized enterprises. Economic Research-Ekonomska Istraživanja, 2021, 34(1):1690-1708.
[2] Kim S, Lee G, Kang H G. Risk management and corporate social responsibility. Strategic Management Journal, 2021, 42(1):202-230.
[3] Bodnar G M, Giambona E, Graham J R. A view inside corporate risk management. Management Science, 2019, 65(11):5001-5026.
[4] Ahmed A, Kayis B, Amornsawadwatana S. A review of techniques for risk management in projects. Benchmarking: An International Journal, 2007, 14(1):22-36.
[5] Chen Z, Hong J, Sun X. Exchange rate risk and trade mode choice in processing trade: Evidence from Chinese data. Review of International Economics, 2020, 28(2):537-564.
[6] Lily J, Kogid M, Mulok D. Asymmetric effect of real exchange rate risk on foreign direct investment: Empirical evidence in ASEAN-4. Journal of Research in Emerging Markets, 2020, 2(3):91-105.
[7] Nurwulandari A. The Effect of the Bank Indonesia Interest Rate, Exchange Rate, and Bond Rating against Bond Yield: Registered Corporate Bonds Issuing Company on the Indonesia Stock Exchange. International Journal of Science and Society, 2021, 3(2):222-231.
[8] Osayi V I, Kasimu A, Nkwonta H C. Financial market derivatives and the performance of deposit money banks in Nigeria. International Journal of Economics, Commerce and Management, 2018, 6(11):382-396.
[9] Bryan D, Rafferty M. Financial derivatives and the theory of money. Economy and society, 2007, 36(1):134-158.
[10] Mohanan P A. Client driven trading strategies: A practical modeling in the context of financial derivatives market. Serbian Journal of Management, 2019, 14(1):123-144.
[11] Maralutua J T, Pulungan N A. Inflation, Interest Rate, and Exchange Rate for their Effect on Profitability and the Implications on Corporate Value: Case Studies in National Banking 2014 until 2019. Journal of Economics, Finance and Accounting Studies, 2022, 4(1):263-279.
[12] Wen F, Xiao J, Huang C. Interaction between oil and US dollar exchange rate: nonlinear causality, time-varying influence and structural breaks in volatility. Applied Economics, 2018, 50(3):319-334.
[13] Meo M S, Chowdhury M A F, Shaikh G M. Asymmetric impact of oil prices, exchange rate, and inflation on tourism demand in Pakistan: new evidence from nonlinear ARDL. Asia Pacific Journal of Tourism Research, 2018, 23(4):408-422.
[14] Amador M, Bianchi J, Bocola L. Exchange rate policies at the zero lower bound. The Review of Economic Studies, 2020, 87(4):1605-1645.
[15] Vartholomatou K, Pendaraki K, Tsagkanos A. Corporate bonds, exchange rates and memorandum: Evidence from Greece and Ireland. International Journal of Finance & Economics, 2022, 27(3):3484-3489.
[16] Hofmann B, Shim I, Shin H S. Bond risk premia and the exchange rate. Journal of Money, Credit and Banking, 2020, 52(S2):497-520.
[17] HCovello V T, Mumpower J. Risk analysis and risk management: an historical perspective. Risk analysis, 1985, 5(2):103-120.
[18] Bonadio B, Fischer A M, Sauré P. The speed of exchange rate pass-through. Journal of the European Economic Association, 2020, 18(1):506-538.
[19] Eichenbaum M S, Johannsen B K, Rebelo S T. Monetary policy and the predictability of nominal exchange rates. The Review of Economic Studies, 2021, 88(1):192-228.
[20] Dogru T, Isik C, Sirakaya-Turk E. The balance of trade and exchange rates: Theory and contemporary evidence from tourism. Tourism Management, 2019, 74(1):12-23.

Sponsors, Associates, and Links

---

• Information Systems and Economics
  
  
• Accounting, Auditing and Finance
  
  
• Industrial Engineering and Innovation Management
  
  
• Tourism Management and Technology Economy
  
  
• Journal of Computational and Financial Econometrics
  
  
• Accounting and Corporate Management
  
  
• Social Security and Administration Management
  
  
• Population, Resources & Environmental Economics
  
  
• Statistics & Quantitative Economics
  
  
• Agricultural & Forestry Economics and Management
  
  
• Social Medicine and Health Management
  
  
• Land Resource Management
  
  
• Information, Library and Archival Science
  
  
• Journal of Human Resource Development
  
  
• Manufacturing and Service Operations Management
  
  
• Operational Research and Cybernetics