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Article
Publication date: 1 May 2007

Desheng Chen, Chunqing Li, Xianjie Xu and Jiasu Lei

This paper analysises China’s optimal scale of foreign reserve during 1985‐2004 with single ratio and synthesis ratio. The single ratio analysis shows that China’s foreign reserve…

Abstract

This paper analysises China’s optimal scale of foreign reserve during 1985‐2004 with single ratio and synthesis ratio. The single ratio analysis shows that China’s foreign reserve to import ratio has exceeded 40 per cent after foreign exchange rate united in 1994. The foreign reserve to money supply ratio is high as 23.8 per cent, and will exceed 25 per cent of international alertness in 2005. The foreign reserve to debt ratio largely exceeded 30 per cent of international alertness. The current account balance to GDP ratio and the current account balance plus FDI to GDP ratio is out of international alertness in most years. The synthesis ratio analysis show that China’s real foreign exchange reserve exceeded foreign exchange demand of debt, FDI and import during 1996‐2004, and the exceeded ratio is close to 90 per cent in 2004. This paper also discusses influence of capital flight after 1995 and international hot money after 2002 to China’s optimal scale of foreign exchange.

Details

Journal of Asia Business Studies, vol. 1 no. 2
Type: Research Article
ISSN: 1558-7894

Keywords

Article
Publication date: 1 April 1991

Christine R. Hekman

Foreign exchange exposure management has traditionally been viewed by corporate line management as a specialized and arcane corporate function. From its organizational position in…

Abstract

Foreign exchange exposure management has traditionally been viewed by corporate line management as a specialized and arcane corporate function. From its organizational position in Treasury or International Treasury, the function and the experts responsible for its execution, are frequently removed from the process of strategic planning and formulation of objectives. Foreign exchange experts are even less frequently consulted on matters of marketing and production investments and operation.

Details

Managerial Finance, vol. 17 no. 4
Type: Research Article
ISSN: 0307-4358

Article
Publication date: 18 September 2007

Edward J. Ferraro

The purpose of this article is to analyze and draw conclusions from recent SEC staff proposals and commissioners' comments and a recent roundtable discussion concerning access to…

235

Abstract

Purpose

The purpose of this article is to analyze and draw conclusions from recent SEC staff proposals and commissioners' comments and a recent roundtable discussion concerning access to foreign exchanges and broker‐dealers by US investors.

Design/methodology/approach

The paper summarizes a proposal by Erik Sirri, Director of the SEC Division of Market Regulation; a proposal by Ethiopis Tafara and Robert J. Peterson, respectively, the Director of the SEC Office of International Affairs and its Senior Counsel; and comments in speeches by Commissioners Roel Campos, Paul Atkins, and Annette Nazareth; and draws conclusions regarding the SEC's current efforts to develop and articulate a strategic approach to mutual recognition.

Findings

As the securities market becomes globalized, there is a growing interest among US investors for foreign securities and for more direct access to foreign broker‐dealers and exchanges. The SEC is determined to remain in the forefront among US government agencies on securities exchange mutual recognition issues, and therefore is pursuing an accelerated agenda to address these issues. The SEC sees its role as not only to function as a bulwark for the protection of US investors but also to take constructive, affirmative steps that serve to strengthen the US capital markets. While the SEC has historically been an advocate for the global convergence of national regulatory standards, it is now considering proposals for a country‐by‐country bilateral approach based upon cooperation among regulators with substantively comparable regulatory regimes.

Originality/value

This paper presents a useful analysis of the direction the SEC is likely to take on the mutual recognition issue by an experienced securities lawyer.

Details

Journal of Investment Compliance, vol. 8 no. 3
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 1 July 1997

Antti Hakkarainen, Eero Kasanen and Vesa Puttonen

This study investigates foreign exchange risk management in major Finnish firms. The shift to a floating foreignexchange regime has increased risk aversion and intensified risk…

Abstract

This study investigates foreign exchange risk management in major Finnish firms. The shift to a floating foreignexchange regime has increased risk aversion and intensified risk management in a number of firms. The managers feel they can forecast foreign exchange development, and that they have been successful in risk management. Managers pay attention to economic exposure, and instead of being closed out, the foreign exchange exposures are managed actively. The transaction risk of both agreed‐upon flows and budgeted items are hedged. Accounting exposures are also managed extensively.

Details

Managerial Finance, vol. 23 no. 7
Type: Research Article
ISSN: 0307-4358

Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

Abstract

Details

Central Bank Policy: Theory and Practice
Type: Book
ISBN: 978-1-78973-751-6

Article
Publication date: 1 February 1985

Ike Mathur

A multinational firm in its normal, day to day conduct of business becomes vulnerable to potential gains and losses due to changes in the values of its assets and liabilities that…

Abstract

A multinational firm in its normal, day to day conduct of business becomes vulnerable to potential gains and losses due to changes in the values of its assets and liabilities that are denominated in foreign currencies. Exporting, importing, and investing abroad expose the firm to foreign exchange risks. Under the 1944 Bretton Woods Agreement, Central Bank interventions in foreign currency markets were frequent, with relatively minor changes in exchange rates. Managers then could afford to ignore foreign exchange exposure. However, with the demise of the Agreement in 1973, exchange rates for major currencies have fluctuated freely, sometimes wildly. These currency fluctuations constantly change the values of foreign currency assets and liabilities, thereby creating foreign exchange risks. Managing these foreign exchange risks now constitutes one of the most difficult and persistent problems for financial managers of multinational firms.

Details

Managerial Finance, vol. 11 no. 2
Type: Research Article
ISSN: 0307-4358

Article
Publication date: 1 January 2006

Mazin A.M. Al Janabi

This paper seeks to provide foreign exchange risk measurement/management techniques and strategies that can be applied to investment and trading portfolios in emerging financial…

1626

Abstract

Purpose

This paper seeks to provide foreign exchange risk measurement/management techniques and strategies that can be applied to investment and trading portfolios in emerging financial markets, such as the Moroccan foreign exchange market, with the objective of setting up the basis of a methodology/procedure for the measurement, management and control of foreign exchange exposures in the day‐to‐day trading operations.

Design/methodology/approach

Demonstrates a proactive approach for the measurements, management and control of market risk exposure for financial trading portfolios that contain foreign exchange securities. This approach is based on the renowned concept of value‐at‐risk (VAR) along with the creation of a software tool utilizing matrix‐algebra technique. In order to illustrate the proper use of VAR and stress‐testing methods, real‐world examples and practical reports of foreign exchange trading risk management are presented for the Moroccan Dirham.

Findings

To this end, several case studies were achieved with the objective of setting up a practical framework of trading risk measurement and control reports in addition to the inception of procedures for the calculation of VAR's limits. Moreover, the effects of hedging of foreign exchange trading exposures with reciprocal equity trading positions were explored and quantified. Finally, initial empirical tests of the long‐term behavior of the Moroccan foreign exchange and debt markets were quantified and analyzed.

Practical implications

In this work, key foreign exchange trading risk management methods, rules and procedures that financial entities, regulators and policymakers should consider in setting up their daily foreign exchange trading risk management objectives are examined and adapted to the specific needs of emerging markets, such as in the context of the Moroccan foreign exchange market.

Originality/value

This paper fills a gap in the foreign exchange risk management literature especially in the emerging markets perspective. The risk management procedures that are discussed in this work will aid financial markets' participants, regulators and policymakers in founding sound and up‐to‐date policies to handle foreign exchange risk exposures.

Details

Journal of Financial Regulation and Compliance, vol. 14 no. 1
Type: Research Article
ISSN: 1358-1988

Keywords

Article
Publication date: 1 February 1978

David P. Walker

The controversy between the “accounting” (“translation” or “balance‐sheet”) and the “economic” (“cash‐flow”) approaches to exchange‐risk is examined. The latter approach is

Abstract

The controversy between the “accounting” (“translation” or “balance‐sheet”) and the “economic” (“cash‐flow”) approaches to exchange‐risk is examined. The latter approach is advocated and a conceptual frame‐work for the cash‐flow analysis is suggested. Finally it is argued that, in the long run, the cash‐flow effects of exchange rate fluctuations are offset by countervailing movements in inflation and interest rates. Exchange‐risk is therefore a short run phenomenon, stemming from unexpected changes in exchange rates.

Details

Managerial Finance, vol. 4 no. 2
Type: Research Article
ISSN: 0307-4358

Article
Publication date: 1 March 1997

Hiroaki Shinoda

The Japanese ‘Big Bang’ is expected to cover almost all areas of the country's financial systems. Within the many, differing revolutionary changes, the ‘front runner’ is the…

Abstract

The Japanese ‘Big Bang’ is expected to cover almost all areas of the country's financial systems. Within the many, differing revolutionary changes, the ‘front runner’ is the reform of the Foreign Exchange Control Law. The objectives of the reform are to make the Tokyo market a global financial centre and to provide free and swift cross‐border transactions for Japanese investors. The principal changes are: (a) liberalisation of cross‐border capital transactions, and (b) the abolition of the authorised foreign exchange bank system and that of the designated securities firms.

Details

Journal of Financial Regulation and Compliance, vol. 5 no. 3
Type: Research Article
ISSN: 1358-1988

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