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19th cross, 7th main, N.S.Palya, BTM 2nd Stage, Bangalore 560076 2003 2005
DECLARATION
I Nagarjun B. R, of MBA IV SEMESTER studying in Alliance Business Academy, Bangalore do hereby declare that this Project titled Risk Management in Foreign Exchange has been prepared by me in the partial fulfillment of the award of MASTER OF BUSINESS ADMINISTRATION under Bangalore University during session 2003-05. My guide for the training has been Prof. Mihir Dash.
I further declare that this project report has not been submitted earlier to any other University or Institute for the award of any Degree or Diploma.
CERTIFICATE
I, Prof. Mihir Dash hereby certify that this dissertation report titled Risk Management in Foreign Exchange has been successfully carried out by Nagarjun.B.R with Registration number 03VMCM6063 under my supervision and guidance during the months of April June 2005.
ACKNOWLEDGEMENT
The satiation and pleasure that accompany the successful completion of task would be incomplete without the mention of the people who have made it possible and whose consent, guidance and encouragement served as a guiding light for the completion of the study. I consider my privilege to place on record my sincere gratitude to the persons who have helped in bringing out this report. I would like to express my sincere thanks to our honorable President, Mr. Sudhir Angur and Director Dr. B.V. Krishnamurthy for having giving me the opportunity to do this dissertation. I would also like to express my gratitude to my project guide Prof. Mihir Dash for guiding and explaining to me the procedures to be followed in carrying out this report without whom the task would not have been completed. I would also like to thank our Program manager, Prof. Narasimhan for giving me the support and encouragement needed for undertaking this work. Last but not the least, I would like to thank my parents and friends for their constant support and encouragement.
TABLE OF CONTENTS
SL NO. CONTENTS EXECUTIVE SUMMARY CHAPTER 1 THEORITICAL BACKGROUND TO THE STUDY CHAPTER 2 DESIGN OF THE STUDY STATEMENT OF PROBLEM OBJECTIVES OF THE STUDY SCOPE OF THE STUDY RESEARCH METHODOLOGY RESEARCH INSTRUMENTS LIMITATIONS OF THE STUDY 27 - 34 34 - 67 1 - 24 25 - 26 PAGE NO.
68 - 69 70
LIST OF TABLES TABLE NO. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 TITLE OF THE TABLE Receiving dollars and not hedging the position Receiving dollars and hedging the position with a forward contract. Receiving dollars and hedging the position with an option contract. Receiving dollars and hedging the position by shifting the risk Receiving dollars and hedging the position by exposure netting Receiving dollars and hedging the position by exposure netting Receiving dollars and hedging the position by swap contract Receiving dollars and hedging the position with the help of risk sharing Paying dollars and not hedging the position. Paying dollars and hedging the position with a forward contract. Paying dollars and hedging the position with an option contract. Paying dollars and hedging the position by shifting the risk. Paying dollars and hedging the position by exposure netting. Paying dollars and hedging the position by exposure netting. Paying dollars and hedging the position by a swap contract. Paying dollars and hedging the position with the contract of risk sharing. Receiving dollars and not hedging the position Receiving dollars and hedging the position with a forward contract. Receiving dollars and hedging the position with an option contract. Receiving dollars and hedging the position by shifting the risk Receiving dollars and hedging the position by exposure netting Receiving dollars and hedging the position by exposure netting Receiving dollars and hedging the position by swap contract Receiving dollars and hedging the position with the help of risk sharing Paying dollars and not hedging the position. Paying dollars and hedging the position with a forward contract. Paying dollars and hedging the position with an option contract. Paying dollars and hedging the position by shifting the risk. Paying dollars and hedging the position by exposure netting. PAGE NO. 37 38 39 39 40 40 41 41 42 42 43 43 44 44 45 45 47 49 50 51 52 53 54 55 56 57 58 59 60
30 31 32 33 34 35 36 37
Paying dollars and hedging the position by exposure netting. Paying dollars and hedging the position by a swap contract. Paying dollars and hedging the position with the contract of risk sharing. Various mean when there are outflows of currencies Various mean when there are inflows of currencies t-test results for outflows of foreign currencies t-test results for outflows of foreign currencies Ranking of the various tools
61 62 63 65 65 66 67 68