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by Mr. A V Rajwade
V. Rajwade is a well-known risk management consultant, author, columnist and trainer. He has authored several books including Handbook of Debt Securities and Interest Rate Derivatives (2007) published by Tata McGraw Hill.
V. He has vast experience and expertise in the financial markets including two decades of working with the SBI in India and abroad and almost three decades of consulting many corporate organizations and banks.
Currency Exposures and Derivatives book. Huge losses incurred in currency derivatives contracts.
A companion volume to his book Cash and Derivatives Markets in Foreign Exchange, this book covers: Types of currency exposures and their effects on the bottom-line of businesses
There are two types of hedge recognized.
There are two types of hedge recognized. For a fair value hedge, the offset is achieved either by marking-to-market an asset or a liability which offsets the P&L movement of the derivative.
Schnabel, Exposure to Foreign Exchange Risk: A Multi-currency Extension, Managerial & Decision Economics, 10, (1989), 331-333. H. White, A onsistent Covariance Matrix and a Direct Test for Heteroscedasticity, Econometrica, 48(4), (1980), 817-838.
Exchange Rate Exposure and Usage of Foreign Currency Derivatives by Indian Nonfinancial Firms. I classify a derivative user as an effective hedger (EH firm) if its risk exposures decreased after the initiation of the derivatives program, and as an ineffective hedger/speculator (IS firm) otherwise.
In particular, users of derivatives have higher gross exposures to financial risks compared to non-users, but lower total risk and market risk, and lower or similar net exposures to foreign exchange rate, interest rate and commodity price risk.
Entities implement different risk management strategies to eliminate or reduce their risk exposures.
Subject: hedging currency risks with derivatives. In the course of writing the thesis, we clarified the notion of risk. Moreover, advantages and disadvantages have been formulated for each hedging instrument, namely forwards, futures, options and swaps. The use of forwards as well as futures allows to avoid losses in case of unfavorable changes in exchange rates, but can not give an opportunity to profit in case of positive changes. Call and put options not only hedge the currency risks, but also provide an opportunity to earn.
Keywords: Derivatives, risk management, hedging, speculation, corporate finance, international finance, corporate . International Corporate Finance eJournal.
Keywords: Derivatives, risk management, hedging, speculation, corporate finance, international finance, corporate governance. Bartram, Söhnke . Corporate Hedging and Speculation with Derivatives (April 6, 2015).