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Import and export enterprises to avoid exchange rate risks
   Exchange rate risk is an economic entity or individual in the foreign economic
activity, due to changes in foreign exchange rates, so that foreign currency
denominated assets or liabilities of uncertain value changes occur, so that the owner
suffered financial losses. It is manifested in two areas: trade, exchange rate risk and
the financial exchange rate risk. In international trade activities, the prices of goods
and services generally is denominated in foreign currency or international currency. In
today's floating exchange rate system, due to the frequent exchange rate
fluctuations, producers and operators conducting international trade activities, it is
difficult to estimate the costs and profits, the resulting risk is called risk trade; in the
international financial markets , loans are in foreign exchange, foreign currency
exchange rate if the loan, the borrower will suffer huge losses 人, dramatic changes
in exchange rates or even can phagocytose large enterprises, foreign currency
exchange rates Bodong also directly affect a country's foreign exchange
reserves worth the change, Conger Ji Central banks in the management of huge risks
and national crisis, such as financial exchange rate risk of exchange rate risk. In this
paper, account of how to avoid the risk of trade at present, to avoid exchange rate risk
trading method mainly in the following categories:
   First, forward contracts to hedge
   When multinational companies with its major trading currencies as means of
payment, the transnational corporations and other contract, agreement at a future date,
the company agreed to pay him the agreed amount of money to get the number of
other long-term payment of money (means of payment), which is far from the solution
set of security hedge contracts.
   Most forward contracts to hedge the company's account with a bank or
other banks signed. And the contract between the company and the bank is not limited
to the offer period of 1 month, 3 months and 6 months. Although more than 1 year of
long-term hedging is less common, but the two sides can reach an arbitrary time
   Suppose a Chinese multinational corporations in the United States opened a
subsidiary, a subsidiary of Chinese company in the United States sold to a Norwegian
importer of goods of 100 million dollars. Goods for sale that day's
exchange rate is 9 dollar 1 U.S. dollar Norwegian krone (NK9 = US $ 1), therefore
the total loan of 900 million kroner. The two sides agreed in 180 days, the importer to
the exporter to pay 9 million kroner. Chinese exporters are the United States assumed
the US $-NK any risk of exchange rate changes. If the Norwegian krone depreciation,
for example, 11 against one U.S. dollar Norwegian krone, then the 180 days, when the
exporter received 9 million Norwegian kroner, the equivalent of 818,181 U.S. dollars
only. However, Chinese exporters are expected to receive one million U.S. dollars,
exchange rate changes have led to the loss of 181,819 U.S. dollars.
   Chinese exporters in the United States can use forward contracts to themselves
from such losses, that is 180 days, the other party to the hedging contracts to pay 9
million Norwegian kroner, while at the same time, the other party agreed to
China's exports business in exchange for payment of one million U.S.
dollars. The other party to pay the actual amount of Chinese exporters generally less
than 100 million, because in this 180-day Nei Kelang possible devaluation of the
contract the other party will be required risk compensation. Assuming the other
requirements of 1% of compensation, said the Chinese exporters agree that 1% means
that 10 thousand U.S. dollars, so the other side to pay 990,000 U.S. dollars only in
exchange for Chinese exporters to 900 million crowns. And the devaluation of the
Crown received only 818,181 U.S. dollars China's exporters compared to a
loss of reduction of 171,819 U.S. dollars.
   Therefore, the 1 million could be considered in this 180 days, the Chinese exporters
to ensure that the actual dollar amount charged to pay a premium. Of course, doing
this decision, the Chinese exporters have to weigh 990 thousand U.S. dollars for the
sale of goods whether it is acceptable for the price. And the free market, like other
prices, there is no law and regulations of 1% or 1 million is the cost of one million
U.S. dollars to hedge.
   In our example, the competent financial manager exporters will make a comparison
between the banks and find the price cheaper to trade. Norwegian krone and the
Chicago Mercantile Exchange is not an international currency trading market.
【】 Poly Jie net import and export business tax planning how to avoid exchange rate
risk if used to pay the money is there, one of eight kinds of trading currencies, namely
the British pound, Canadian dollar, German mark, Dutch guilder, French franc,
Japanese yen, Mexico peso, Swiss franc, then the financial manager should be an
international money market (IMM) contract offer.
   Second, currency futures hedging
   If the financial manager in the commodity or stock exchange to hedge foreign
exchange (such as the use of IMM contract), involving futures contracts to hedge,
rather than forward contracts. In the international currency market, currency trading is
often regarded as commodities, and in the form of futures contracts trading. Futures
contracts and forward contracts to hedge the cost difference is not determined by a
bank, but the exchange floor, through the parties to the transaction open and fair
bidding formation. Futures contracts are traded by brokers, exporters must be opening
one of its broker margin account. Futures contract is a fixed amount, such as
£ 25,000, and the use of standard delivery date. Financial managers can use a
currency futures market, the relative increase or decrease the value of the benefits for
the company to avoid foreign exchange risk or speculative gain. This is mainly
through the buying or selling futures, the establishment of long positions or short
positions to achieve.
   For companies mentioned above, two situations are good results, but the company
also took the risk. Short-term fluctuations in currency values, both in direction and
magnitude of extreme uncertainty. If the monetary value to the contrary, those
companies (or financial manager) can only accept a bad outcome. Those of money
market or traded in the market who are very cautious to predict short-term trend.
   Third, currency options hedging
   Option is available in the future sale of the power of a period of time, is to buy the
seller pays a certain amount (ie royalties) have in the future after a period of time
(referring to American option) or a specific future date (European option that ) to a
predetermined good price (ie strike price) to the seller to purchase or sell a certain
number of specific subject matter of power, but must live with the obligation to buy or
sell. In fact this is the right option trading transactions. The buyer has the right to have
non-implementation of the rights and duties, completely flexible options. Options
trading also known as contract rights, is highly developed in the futures basis to
develop. Common securities in exchange for options trading. The purchase of an
insurance options are prepaid or deposit, you can have the right to a specified future
date (3 months, 6 months or 9 months) at a fixed price to buy or sell a certain number
of shares. The stock price is expected to require the purchase of the option, that is the
right time in the stock price to purchase option agreement when the price (relatively
low) to purchase shares; the expected stock price drop, need to obtain a sale of options,
that is When stock prices fell, the right to buy options when the contract price (higher)
sale of stock. If the stock price is not expected to change in accordance with, the
permit option invalid. This hedge can be achieved, the purpose of avoiding risk.
Currency options are based on the object currency, trading both sides of the exchange
rate as agreed on a future time to buy or sell a foreign exchange option transactions
conducted. Currency options is to prevent the risk of an important means of foreign
exchange, currency options contracts in the implementation, the physical delivery of
currency can also be spread delivery. Currency options trading options trading
principles and other similar transactions in the same price of buying a call option and
selling a put option, you can pose a hypothetical long-term buy.
   Currency options developed very rapidly, the turnover is also growing. The first
currency option contracts, is in November 1982 in Montreal, Canada Canadian dollar
exchange options contracts began. Subsequently, the exchange has succeeded in
introducing the pounds, German marks, Swiss francs and Japanese yen and other
currency options, in 1985 the Dutch introduced the European currency unit options,
FX options volume reached 20 billion U.S. dollars. 1988 transactions in the world
currency market has 18 million options contracts, a flexible hedging against foreign
exchange risks and financial instruments.
   Fourth, credit markets or money market hedge
   Credit market or currency hedging related to the credit market - that is, to borrow
Import and export enterprises to avoid exchange rate risk hedging is eager borrowers.
Assume that a company will use 10 million euros for three months, how that kind of
money market to hedge through it? Operation strategy first: Today, I assume there is
idle funds on hand, I converted the currency into euros; second approach: assume that
there is no money in hand, need to borrow from banks, today, by the currency, the
yuan replaced Euro store, three months later expired, paid in euros, so even if the
euro's appreciation, you do not need to worry about. This is the money
market hedging.
   In the use of credit or money market hedge before, exporters must be located in
countries and importers to do about interest rates between the countries compared, if
the importer country exporters that interest to use the money than it gained much
higher profits, then the cost of such hedging may be too large.
   5, currency swaps (swap)
   Swap what does that mean? Is originally a foreign currency assets or liabilities, that
I was a change, and replaced with another. For example, a British company and a U.S.
company, a British company investment in the United States, and this investment will
gradually after five years of income into U.S. dollars, while U.S. companies in the UK
as there are also some projects will receive £ British pound is better for companies,
the U.S. dollar companies better, they both adopted the role of financial
intermediation to a swap, according to the agreed exchange rate, today I Jiugen UK
U.S. company agreed, and five years later you change your pounds to me, I change
my dollars to you, this is the so-called swaps, that some banks to do business in, the
external debt of the euro into dollars of debt, and then need to pay in dollars, while
another company wanted to use euros to pay for itself, just to find matching two
companies play this role through the financial end, the two sides are locked in terms
of risk.
   6, to speed up payment or deferred payment
   We assume that, in accordance with the payment contract, exporters, importers
must pay the host country's currency. If the importer of the national
currency relative to forecast foreign currency suppliers would rise, then the deferred
payment help his own company. On the contrary, if the domestic currency relative to
the importer forecast foreign currency will depreciate in value supplier, then speed up
the payment benefit his own company.
   For example, when the Norwegian krone exchange rate is 9 1 U.S. dollar, if the
importer agreed to pay one million U.S. dollars, then the time it takes the equivalent
of 9 million kroner. If the payment, the exchange rate against one U.S. dollar fell to 10
kroner. At this point the cost is 10 million NOK. In this case, the importer should pay
the price in advance, or if possible, it should be immediately convertible foreign
exchange, and then the advent of the payment date of payment in foreign currency. Of
course, the opposite situation is predicted if the importer entered into purchase
contracts from NOK 9 Norwegian krone against one U.S. dollar based on the
appreciation, then it should be postponed and postponed the payment of NOK
converted into U.S. dollars.