国际金融论文
花了三个小时终于完成了一千二百多个词的国际金融论文,真的很有成就感! 这其实是一次期中作业,老师布置了题目让我们来分析!没写之前总感觉很怕,觉得自己记的专业术语还有知识不够,肯定写不出这么长的文章,可是当我真正动笔时,竟然发现是这么的好玩!哈哈! 啪啪啪地不停地敲打着键盘,看着一个个从我思维里冒出的英文单词,我感到很自豪, 想不到我现在真正地把英语用到我的专业上了,哈哈!可能没有经济学知识的朋友会看不懂这篇论文的,不要介意,哈哈! 这星期超完成三篇超长的英语论文,之前那篇是和一个英语系教授学习要写的,这篇是国际金融的,还有一篇是关于GRE作文的,现在还没动笔,我会尽快完成的.除了英语以外,还有环境科学导论,经济法两篇五千词的论文要在两个星期内弄完!今天早上在风险管理课上和左瑞组合准备做一个PPT式的课题要在两周后在课上试讲,现在都还没开始准备,我想等我考完BEC高级再说,真是数不尽的事情要做啊!
我当男班长算是幸运的一个了,因为有一个认真负责的女班长刘滢在帮助我.省了我很多功夫,呵呵.最近收读书笔记和假期见闻以及订书的事情都是她在弄,弄得我很不好意思.不过她真的很积极,很认真! 我相信我们以后会合作得更好的!
小琪
Answer the following question :
A company has extensive trading relationships through exports and foreign owned subsidiaries throughout the world, which involve a variety of foreign currencies and payments systems. The current company policy for managing the currency exposure is to cover all net foreign exchange positions with forward contracts and where these are unavailable, to invoice the payment in a deep convertible currency such as the US$. However, the recent behaviour of forward rates of the major foreign currencies that the company has been dealing in has led to losses in the currency transactions compared with the spot rate prevailing at the time of delivery. The company is now debating the wisdom of its current policy and is seriously considering the whether it should engage in foreign exchange rate forecasting and leaving exposed positions open at times.
You are asked to prepare two contrasting reports for the Board on:
1. Support for the existing policy of covering all currency exposures through demonstrating the futility of attempting to forecast future spot exchange rates and the unacceptable risk to the company of leaving currency positions open.
For large transactions involving international trade n goods and services, international financial investment, or pure speculation on future exchange rate movements, forward foreign exchange rates are often useful. As is widely shared, a forward foreign exchange contract is an agreement to exchange one currency for another on some date in t
he future at a price set now(the forward exchange rate).the common dates for future exchange are 30, 90 and 180days forward.
After knowing the definition of future foreign exchange contract, we need to probe into its advantages to the business dealers. Below is my further explanation.
As we all know, a person( or an organization like a firm) is exposed to exchange rate risk if the value of the person’s income, wealth, or net worth changes when exchange rates rate unpredictably in the future. For instance, if you are an American and invest in British stocks with 144070 dollars which will be converted into 100000 sterling pounds with the spot exchange rate of $1.4407 per sterling pound. You harbour a great expectation that the price of the stocks will rise with 5% and 30 days later it does turn out to be so! You can harvest 105000 pounds in return. However, when you feel extremely happy for your seemingly clever expectation, a bad news may come to you that the value of sterling pound has depreciated by 10%. The exchange rate turns out to be $1.2966 per sterling pound. Then the value of your stocks will be just 136143 dollars after converted back into dollar which means you have suffered a loss of 7927 dollars! From the case above, we may know how important it is to control our exposure to the exchange rate risk, especially when we are doing transactions across countries! Hence, the forward foreign exchange contract exactly provides us with a convenient and safe way to hedge our position exposed to the rate risk! How can a forward foreign exchange contract hedge our position? Let’s share the case mentioned above again in order to have a clear picture of it!
Suppose you have predicted in the future the value of peso will depreciate. Then the minute you invest in the Mexican stocks, you can meantime buy a forward contract in which you promise to sell 105000 sterling pounds for 15127.35 dollars in 30 days. Then 30 days later, after you get 105000 pounds, you can simply use 105000 of them to buy 15127.35 dollars, which means you still harvest a benefit of 5% from your total investment!
From our discussion above, now you may get the realization that a forward foreign exchange contract does contribute greatly to eliminating our rate exchange. So now we are moving to the actual situation of our company. As is known to us all, A company has extensive trading relationships through exports and foreign owned subsidiaries throughout the world, which involve a variety of foreign currencies and payments systems. Thereby, in order to reduce the rate risk in the current fluctuating market, we desperately need to hedge our position and ensure our benefits from investment in foreign market! Then forward foreign exchange contract is literally a good choice!
2.Support for introducing a function for forecasting foreign exchange rates and the benefits of operating a flexibly managed currency policy through demonstrating the capacity for exchange rate f
orecasting, the need for taking views on likely exchange rate movements as well as the limitations of forward contracts to cover all exchange risks.
On the contrary to assigning a forward contract to hedge our position exposed to foreign exchange rate risk, I prefer to speculate on the exchange rate in order to earn a greater profit!
Definitely, entering a forward foreign exchange contract does have a lot of advantages, but its disadvantages cannot be negligible. It can reduce our potential benefits by hedging our position. Now I will take an example to illustrate my point!
Suppose you are an American and plan to invest an amount of 144070 dollars in the British stocks with an expectation of 5% increase. Given the exchange rate $1.4407 per sterling pound, you actually put 100000 sterling pounds into the stocks. Meantime, you predict the sterling pound will depreciate by 10% in 30 days. Therefore, you enter into a forward foreign exchange contract in which you promise to sell 105000 pounds for 151273.5 dollars (the value after the increase of the price of the stocks). You will think optimistically that no matter what happens to the exchange rate in the future, your profits will remain unchanged. If the sterling pound does depreciate in 30 days, you will feel extremely lucky for signing the contract. This is definitely true! But what if the sterling otherwise appreciates by 20% then? That means the exchange rate of the sterling pound increases to 1.7288 dollar per pound? At this moment, while you still feel somewhat secured with your profits, you will feel a slice of upset, because meanwhile you lose your deserved extra profits with the increased value of sterling pound! If you did not sign the contract, you can get up to 181528.1 dollars other than merely 151273.5 dollars.
Based on this, we can conclude that while we can firmly hedge our position exposed to exchange rate, we may also lose the potential benefits we deserve! Now we can combine this theory with our company’s current situation! As is mentioned in the material, the recent behaviour of forward rates of the major foreign currencies that the company has been dealing in has led to losses in the currency transactions compared with the spot rate prevailing at the time of delivery. That means the exchange rate always change to our advantageous direction and more importantly we can predict its changing direction correctly! Under such condition, I firmly believe if we engage in foreign exchange rate forecasting and leaving exposed positions open at times when the exchange rate goes to our favourable direction, we will benefit more in the coming transactions!