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Hedging Instruments against Foreign Exchange Risk

A Project Report submitted to Indian Institute of Information Technology, Allahabad In the partial fulfillment for the Degree of Master of Business Administration in Information Technology

Under the Supervision of Dr. ShvetaSingh Mr. Ashish Srivastava By ABHISHEK SINGH AJAY PAL SINGH MAHENDER SINGH.M SHAILENDER SINGH SHASHWAT PANDEY

May-2010

INDIAN INSTITUTE OF INFORMATION TECHNOLOGY, ALLAHABAD Deoghat, Jhalwa, Allahabad, U.P., India 211012

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CERTIFICATE

I / we hereby certify that the Fourth Semester Master Project prepared by .. titled is an original piece of work done by me/us under the supervision of ..

I/we certify that the submitted work has not been undertaken elsewhere and is free from plagiarism as per the www.plagiarismdetect.com website report.

[Candidates Signature]

Recommended in the partial fulfillment for the Degree of Master of Business Administration in Information Technology examination.

[Internal Guide]

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Check List for Revised MBA/MSCLIS Project Reports of Two/Six Months Duration 1. Name of Student(s) with Roll No. Mr. Abhishek Singh (IMB2008053) Mr. Ajay Pal Singh (IMB2008029) Mr. Mahender Singh (IMB2008022) Mr. Shailendra Singh (IMB2007058) Mr. ShashwatPandey (IMB2008004) 2. Title of the Project: Hedging Instruments against Foreign Exchange Risk 3. List of Computer resources used in addition to general network connected PC hardware, please mention below if any Software including operating system(s), compiler(s) any 4GL(s), 5/W tools, libraries were used duly mentioning their types (open source / Free and open source / shareware / proprietary or any other) with version number of the resource. Windows 7 Basic MS Office 2010 4. Category of the Project & your contribution claimed Research Project Study of Hedging Instruments against Foreign Exchange Risk.

5. Claims of the work done in light of competitive already available in academic domain/ products / providers of items or services of proprietary domain. This is a purely fresh work which is done by us and there is no competitive work available in academic domain / providers of items or services of proprietary domain. We have taken certain information relevant to our study from various journals, magazines and books which we have listed in the Reference section. We have used certain documents for our reference.
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Hedging Instruments against Foreign Exchange Risk

Plagiarism Report -

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Acknowledgement

Behind every achievement lies an unfathomable sea of gratitude to those who have extended their support and without whom it would ever have come into existence. To them I say my words of gratitude. Apart from our efforts, the successful completion of this project depends largely on the encouragement and guidelines of many others. We take this opportunity to express our gratitude to the people who have been instrumental in the successful completion of this project.

We would like to show our greatest appreciation to our project guides Dr.Shveta Singh and Mr.Ashish Srivastava. We cant say thank you enough for their tremendous support and help. Without their constant co-operation, encouragement and guidance this project would not have materialized.

Also we would like to thank, Dr.Anurika Vaish (Divisional Head, MBA (IT) & MSCLIS)for providing the opportunity to take up this project and her valuable direction.

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Executive Summary
Risk can be broadly classified into two groups; business and financial. Business risk is associated with the operating environment such as technological changes, marketing, etc. Financial risk includes foreign exchange rates, interest rate, and commodity prices. Foreign exchange risk arises as a result of uncertainty about the future spot exchange rate. It is a result of uncertainty about the future spot exchange rate (due to the variability of exchange rates), the domestic value of assets, liabilities, operating incomes, profit, rates of return, and expected cash flows that are stated in foreign currency are uncertain. The report explains the various hedging strategies employed by firms to manage their foreign exchange risks. The uses of the following derivative instruments are explained: Forwards Futures Options Swaps Foreign Debt The report explains the hedging strategies that a firm should employ for managing foreign exchange risk using Currency Options. The report explains the scenarios and their respective hedging strategies. The scenarios are: Bullish Conditions Bearish Conditions Volatile Conditions Different periods are taken for analysis where historically the currency has shown the above conditions and the analysis is done on the basis of the results.

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Table of Content1 Introduction.9 1.1 Motivation..11 1.2 Objective..11 1.3 Problem Definition.11 1.4 Kind of Foreign Exchange Exposure...11 1.5 Factor affecting decision to hedge foreign currency risk....12 1.6 Foreign exchange risk management framework...13 1.7 Hedging strategy/Instruments...14 2 Literature Review/Related Work..16

3 Methodology...17 3.1 Method......17 3.2 Data Collection Sources...18 4 Selecting suitable strategy for managing Forex Risk...18 4.1 Currency option strategies for Import transactions in Bullish Market conditions.18 4.2 Currency Option Strategies for Export Transactions in Bearish Market Conditions....20 4.3 Currency Option Strategy for Import Transaction in Volatile Market Condition...21 5 Analysis and Result...24 5.1 Bullish Market Condition25 5.2 Bearish Market Conditions27 5.3 Volatile Market Conditions29 5.4 Comparisons of various hedging tools..30 6 7 8 9 Findings..34 Suggestions to SMEs..35 References...36 Appendixes..37
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Hedging Instruments against Foreign Exchange Risk

List of Figures 1. Indian Rupee US $exchange rates in past 120days...10 2. Indian Rupee Euro exchange rates in past 120 days.10 3. Framework for Foreign Exchange Risk Management14 4. Long call option..25 5. Short put option..26 6. Combination of Long Call and Short Put Option...27 7. Long put..27 8. Short call option.27 9. Anticipation of spot rate movement.32 10. Spot comparison.33 11. Head to Head..33 12. Hedging In Action..33 13. Future, Spot, Forwards.34

List of Tables 1. Futures Vs. Spot rates.30 2. Futures Vs. Forwards31 3. Comparing Futures, Forwards & Spot Rates31

Abbreviations & Symbols Used 1. USD$.US Dollar 2. INR.Rs..Indian National Rupees

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1. IntroductionThe Bretton Woods systems of administering the Foreign exchange rates were abolished in favor of the market determination of the foreign exchange which was regarded as the regime of the fluctuating exchange rates when it was introduced. Apart from that there was a lot of volatility is happening in the other markets around the world owing to increase inflation rates and the oil price. The Corporate was struggling to cope with the uncertainty in profits, cash flows and the future cost estimations. It was then that the financial derivatives such as foreign currency, interest rates and commodity derivatives has emerges as the means of the managing risk facing corporations. In India, the exchange rates were de-regulated and were allowed to be determined by markets in the year 1993. The economic liberalization measures of the early nineties facilitated the introduction of derivatives based on the interest rates and foreign exchange. However derivatives use is still a highly regulated area due to the main reason of high convertibility of the rupee. At present Forwards, SWAPS, and options are available in India and the use of the foreign currency derivatives is permitted to a limited extent for the purpose of hedging only. The project studies about the prospective on managing the risk that any firm faces due to change in the fluctuation rates of the currency. The study investigates the prudence in investing resources towards the main purpose of Hedging and then it introduces a concrete tool for the purpose of risk management. These are applicable to the Indian scenario. The motivation of this study came from the recent rise in the volatility in the money market of the across the globe and specifically to the fluctuations in the price of US Dollar ,due to which Indian exports were fast gaining a cost advantages. Hedging with the derivatives instruments is a feasible solution to such a condition. This project attempts to evaluate and observe the various alternatives and options which would be available for the organizations for hedging the financial risks. By studying the use of hedging instrument by major Indian firm across the various sectors, the paper concludes that forward and options are preferred as short term hedging instruments whereas SWAPS are preferred as long term hedging instruments. The frequent high usage of forward contracts by Indian firms as in comparison to the other markets underscores the need for rupee futures in India. Apart from that in addition to that the paper also looks at various ways by which it is being accomplished. A review of the available literature results in the development of a frame work for the risk management process design and a compilation for the determination of hedging decision of the firms. At the end this paper concludes by pointing out that the onus is on the Reserve Bank of India (RBI), as the apex bank of the India and its working group on rupee futures realizes the need for rupee futures in India and the convertibility of the rupee.

1.1 MotivationThe key assumption in the concept of foreign exchange risk is that exchange rate changes are not predictable and that this is determined by how efficient the markets for foreign exchange are. Research in the area of efficiency of foreign exchange markets has thus far been able to
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establish only a weak form of the efficient market hypothesis conclusively which implies that successive changes in exchange rates cannot be predicted by analyzing the historical sequence of exchange rates. However, when the efficient markets theory is applied to the foreign exchange market under floating exchange rates there is some evidence to suggest that the present prices properly reflect all available information. This implies that exchange rates react to new information in an immediate and unbiased fashion, so that no one party can make a profit by this information and in any case, information on direction of the rates arrives randomly so exchange rates also fluctuate randomly. It implies that foreign exchange risk management cannot be done away with by employing resources to predict exchange rate changes. The extremely volatile nature of the foreign exchange markets makes it imperative for the firms dealing in Forex to take cautionary steps to avoid undesired consequences, which may lead to shrinking profits. As the following graphs of US$ and Euro exchange rates against Indian Rupee indicates how volatile the foreign exchange can be. Of late the volatility has been constantly increasing due to global recession.

Indian Rupee US $exchange rates in past 120 days

Figure -1

Indian Rupee Euro exchange rates in past 120 days

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1.2 ObjectiveThe objective of this project is to study the various hedging options available for exporters and importers to hedge against volatile nature of foreign exchange in India and to find out the effectiveness of hedging tools, Futures & Forwards, separately. Also try to do a comparison of the prevailing practice of Forwards Contracts as hedging tool with the relatively new and so far less tried Currency Futures.

1.3 Problem DefinitionOver the past decades, statistics show that international trade has grown even more rapidly than domestic economic activity in an endeavor to optimize the global allocation of resources. The main problem deals with the exchange rates as the exchange rate between currencies are volatile and these interests all bear currency risk. The consequence of movements in foreign currency exchange rates can vary from receiving higher cash flows or paying higher sums due to an appreciation of the currency of the transaction. Movements in foreign exchange rates can also affect positively or negatively the value of a company. So the consideration here is to find a suitable tool for foreign exchange hedging after comparing the tools available for firms here in India.

1.4 Kinds of Foreign Exchange Exposure


Risk management techniques vary with the type of exposure (accounting or economic) and term of exposure. Accounting exposure, also called translation exposure, results from the need to restate foreign subsidiaries financial statements into the parents reporting currency and is the sensitivity of net income to the variation in the exchange rate between a foreign subsidiary and its parent. Economic exposure is the extent to which a firm's market value, in any particular currency, is sensitive to unexpected changes in foreign currency. Currency fluctuations affect the value of the firms operating cash flows, income statement, and competitive position, hence market share and stock price. Currency fluctuations also affect a firm's balance sheet by changing the value of the firm's assets and liabilities, accounts payable, accounts receivables, inventory, loans in foreign currency, investments (CDs) in
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foreign banks; this type of economic exposure is called balance sheet exposure. Transaction Exposure is a form of short term economic exposure due to fixed price contracting in an atmosphere of exchange-rate volatility. The most common definition of the measure of exchange-rate exposure is the sensitivity of the value of the firm, proxied by the firms stock return, to an unanticipated change in an exchange rate. This is calculated by using the partial derivative function where the dependent variable is the firms value and the independent variable is the exchange rate (Adler and Dumas, 1984).

1.5Factors affecting the decision to hedge foreign currency riskResearch in the area of determinants of hedging separates the decision of a firm to hedge from that of how much to hedge. There is conclusive evidence to suggest that firms with larger size, R&D Hedging Strategies against foreign exchange risk using Options expenditure and exposure to exchange rates through foreign sales and foreign trade are more likely to use derivatives. First, the following section describes the factors that affect the decision to hedge and then the factors affecting the degree of hedging are considered. Firm size: Firm size acts as a proxy for the cost of hedging or economies of scale. Risk management involves fixed costs of setting up of computer systems and training/hiring of personnel in foreign exchange management. Moreover, large firms might be considered as more creditworthy counterparties for forward or swap transactions, thus further reducing their cost of hedging. The book value of assets is used as a measure of firm size. Leverage: According to the risk management literature, firms with high leverage have greater incentive to engage in hedging because doing so reduces the probability, and thus the expected cost of financial distress. Highly levered firms avoid foreign debt as a means to hedge and use derivatives. Liquidity and profitability: Firms with highly liquid assets or high profitability have less incentive to engage in hedging because they are exposed to a lower probability of financial distress. Liquidity is measured by the quick ratio, i.e. quick assets divided by current liabilities). Profitability is measured as EBIT divided by book assets. Sales growth: Sales growth is a factor determining decision to hedge as opportunities are more likely to be affected by the underinvestment problem. For these firms, hedging will reduce the probability of having to rely on external financing, which is costly for information asymmetry reasons, and thus enable them to enjoy uninterrupted high growth. The measure of sales growth is obtained using the 3-year geometric average of yearly sales growth rates. As regards the degree of hedging conclude that the sole determinants of the degree of hedging are exposure factors (foreign sales and trade). In other words, given that a firm decides to hedge, the decision of how much to hedge is affected solely by its exposure to foreign currency movements. This discussion highlights how risk management systems have to be altered according to characteristics of the firm, hedging costs, nature of operations, tax considerations, regulatory requirements etc. The next section discusses these issues in the Indian context and regulatory environment.
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1.6 Foreign Exchange Risk Management Framework


Once a firm recognizes its exposure, it then has to deploy resources in managing it. A heuristic for firms to manage this risk effectively is presented below which can be modified to suit firm-specific needs i.e. some or all the following tools could be used. Forecasts: After determining its exposure, the first step for a firm is to develop a forecast on the market trends and what the main direction/trend is going to be on the foreign exchange rates. The period for forecasts is typically6 months. It is important to base the forecasts on valid assumptions. Along with identifying trends, a probability should be estimated for the forecast coming true as well as how much the change would be. Risk Estimation: Based on the forecast, a measure of the Value at Risk (the actual profit or loss for a move in rates according to the forecast) and the probability of this risk should be ascertained. The risk that a transaction would fail due to market-specific problems should be taken into account. Finally, the Systems Risk that can arise due to inadequacies such as reporting gaps and implementation gaps in the firms exposure management system should be estimated. Benchmarking: Given the exposures and the risk estimates, the firm has to set its limits for handling foreign exchange exposure. The firm also has to decide whether to manage its exposures on a cost centre or profit centre basis. A cost centre approach is a defensive one and the main aim is ensure that cash flows of a firm are not adversely affected beyond a point. A profit centre approach on the other hand is a more aggressive approach where the firm decides to generate a net profit on its exposure over time. Hedging: Based on the limits a firm set for itself to manage exposure, the firms then decides an appropriate hedging strategy. There are various financial instruments available for the firm to choose from: futures, forwards, options and swaps and issue of foreign debt. Hedging strategies and instruments are explored in a section. Stop Loss: The firms risk management decisions are based on forecasts which are but estimates of reasonably unpredictable trends. It is imperative to have stop loss arrangements in order to rescue the firm if the forecasts turn out wrong. For this, there should be certain monitoring systems in place to detect critical levels in the foreign exchange rates for appropriate measure to be taken. Reporting and Review: Risk management policies are typically subjected to review based on periodic reporting. The reports mainly include profit/ loss status on open contracts after marking to market, the actual exchange/ interest rate achieved on each exposure, and profitability vis--vis the benchmark and the expected changes in overall exposure due to forecasted exchange/ interest rate movements. The review analyses whether the benchmarks set are valid.

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Figure 3- Foreign Exchange Risk Management Framework

1.7 Hedging Strategy/ InstrumentsA derivative is to treated as the financial contract whose value is derived from the value of some other financial asset such as stock price, a commodity price, an exchange rate, an interest rate, or even an index of prices. The main role of the derivatives is to reallocate risk among financial market participants which helps to make financial markets more complete and competent. This section highlights the hedging strategies for using derivatives with foreign exchange as being considered the only risk assumed. Forwards: Forwards are made-to-measure an agreement between the two parties to buy or to sell a specified amount of a currency at a specified rate on a particular date in the future purpose. The depreciation on received or receivable currencies hedged against by selling a currency forward. If the risk of a currency appreciation (or the firm has to buy the currency in future time say for import), it can hedge by buying the currency forward. E.g if (RIL) Reliance India limited. wants to buy barrels of crude oil in US dollars for six months hence, it can enter into a forward contract to pay INR and buy USD and lock in a fixed exchange rate for INR-USD to be paid after 6 months regardless of the actual INR-Dollar rate at the time. In this example the appreciation of Dollar which is protected by a fixed and forward contract. The main advantage of a forward contract is that, it can be tailored to the required needs of
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the firm and an exact hedging can be obtained. Besides these contracts are not marketable, yet they cant be sold to another party when they are no longer required for binding. Futures: Futures contracts and forward contracts are both similar but it is more liquid in contracts because it is traded in an organized exchange that as the futures market. In depreciating a currency can be hedged by selling the futures and appreciation can be hedged by the buying futures. Advantages of future contracts in a central market are for futures which eliminates the problem of double coincidence. Futures contracts require a less initial outlay a proportion of the value of the future in which huge amounts of money can be gained or lost with the accurate forward price fluctuations. It provides a sort of leverage in contracts. The previous example for a forward contract for RIL applies here also just that RIL will have to go to a USD futures exchange to purchase standardized dollar futures equal to the amount to be hedged as the risk is that of appreciation of the dollar. As mentioned earlier that the tailor ability of the futures contract is limited that as standard denominations of money can be bought instead of the exact amounts that are bought in forward contracts. Options: Currency Options are giving the right contract, not the obligation, to sell or buy a specific quantity of one foreign currency in exchange for another at a fixed price called the Exercise Price or Strike Price. The fixed nature of the price reduces the exchange rate changes and limits the losses of open currency price positions. Options are well suited as a hedging tool for contingent cash flows as is the case of bidding processes also. Call Options are mostly used if the risk is an upstream trend in pricing of the currency, while Put Options are used if the risk is a downstream trend. Once again taking the example of (RIL) which needs to purchase crude oil in USD in 7 months, if (RIL) buys a Call option (as the risk is an upward trend in dollar rate), i.e. the right time to purchase a specified amount of dollars at a fixed rate on a specific date, there are two scenarios. If the exchange rate movement is favorable i.e. the dollar depreciates, then RIL can buy them at the spot rate as they have become cheaper. In some other case, if the dollar increases compared to todays spot rate, RIL can exercise the option to buy it at the agreed strike price. In both case RIL would benefits by paying the lower price to purchase the dollar. Swaps: A swap is a foreign currency contract whereby the simultaneous purchase and sale of identical amount of one currency for another with two different value dates is performed, at the spot rate. The buyer and seller exchange both the fixed or floating rate interest payments in their respective currency swapping over the term of the contract. At the time of maturity the principal amount is effectively re swapped at a predetermined exchange rate so, that the parties end up with their original currencies. The benefits of swapping the firms with limited appetite for exchange rate the risk may move to a partially or completely hedged position through the mechanism of foreign currency swaps while leaving the underlying borrowing intact. As a part of covering the exchange rate risks, swaps also allow firms to hedge the floating rate of interest risk. Consider an export based company that has entered into a swap for a national principal of USD $1 at an exchange rate of 42/dollar. The company pays US 6months LIBOR to the bank and receives 11.00% p.a. every 6 months on January 1st & July 1st, till five years. Such as a company would have profits in Dollars and can use the same to
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pay interest for this kind of borrowing (in dollars rather than in Rupee) thus hedging has exposures. Foreign Debt: The foreign debt can be used by taking advantage of the International Fischer Effect relationship to hedge foreign exchange exposure. The example can be demonstrated as an exporter who has to receive a fixed amount of US dollars in a few months from present. The exporter stands to lose if the domestic currency appreciates against that currency in the meanwhile so, to hedge this; he could take a loan in the foreign currency for the same time period and convert the same into domestic currency at the current exchange rate. The theory assures that the gain realized by investing the proceeds from the loan would match the interest rate payment (in the foreign currency) for the loan.

2-Literature review/Related Work


There is a spectrum of opinions regarding foreign exchange hedging. Some firms feel hedging techniques are speculative or do not fall in their area of expertise and hence do not venture into hedging practices. Other firms are unaware of being exposed to foreign exchange risks. There are a set of firms who only hedge some of their risks, while others are aware of the various risks they face, but are unaware of the methods to guard the firm against the risk. There is yet another set of companies who believe shareholder value cannot be increased by hedging the firms foreign exchange risks as shareholders can themselves individually hedge themselves against the same using instruments like forward contracts available in the market or diversify such risks out by manipulating their portfolio. (Giddy and Dufey, 1992). The literature on the choice of hedging instruments is very scant. Among the available studies, Gczy et al. (1997) argues that currency swaps are more cost-effective for hedging foreign debt risk, while forward contracts are more cost-effective for hedging foreign operations risk. This is because foreign currency debt payments are long-term and predictable, which fits the long-term nature of currency swap contracts. Foreign currency revenues, on the other hand, are short-term and unpredictable, in line with the short-term nature of forward contracts. A survey done by Marshall (2000) also points out that currency swaps are better for hedging against translation risk, while forwards are better for hedging against transaction risk. This study also provides anecdotal evidence that pricing policy is the most popular means of hedging economic exposures. These results however can differ for different currencies depending in the sensitivity of that currency to various market factors. Regulation in the foreign exchange markets of various countries may also skew such results. But when it comes to study in consideration of SMEs, not very much literature is available yet.

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3. MethodologyThe objective of this paper is the comparative analysis of different hedging strategy available for Indian SMEs. The research was analytical and descriptive in nature. Other attributes of the research are as follows Sampling: Non Probability Sampling Population: All the transactions Neetee Clothing was involved in after September 08 and settlement date being on or before May 09, involving foreign currency exchange. Sample size:18 (the transactions in INR USD only; 13 export and 5 import; have been taken as samples) Period under study:9 months Data- Secondary Data

3.1 MethodThe first step in the paper is to go through the various research papers available on the different currency hedging strategies available for companies. The next step was identifying the data which would be required for proceeding with the paper. The data that is needed for the paper is primarily the currency rates between Rupee and Dollar. Next step down the line was data collection. The paper involves the study of hedging strategies in the following three scenarios regarding the Rupee v/s Dollar exchange rate: Bullish Market Conditions Volatile Market Conditions Bearish Market Conditions

The daily exchange rates for INR/USD, INR/EURO were then collected from the RBI website. Using the daily exchange rates the periods were identified where the exchange rate experienced the above three conditions. For example, the Dollar was in bullish phase from 9th Jan, 2007 to 3rd March 2007 when the exchange rate rose by 7.9% from 48.18 to 51.97. The conditions were bearish in past 1 year where Dollar experienced decrease. Similarly, the exchange rate experienced the greatest volatility between the period 1st March, 2007 to 23rd December, 2008 where the Standard deviation was as high as 2.97. Based on the aforesaid market conditions, the suitable hedging strategies were applied. The option premium was calculated using the Black-Scholes Model. The data ordering involved various assumptions because of unavailability of certain data. For example, the Strike Prices in certain cases were taken to be the mean of the spot prices for the given period. For strategies that involved hedging with more than one Option like Strangle or Butterfly Spread, the Strike prices were assumed as mentioned in the data ordering part of the project. By applying the mentioned

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strategies in the above market conditions, the Net Cash flow for the importer and the exporter were calculated. The results thus prove the suitability of the hedging strategies applied. Next, Forward Rates practiced by Neetee during 1st of September 2008 and maturity date being on or before May30th 2009, were taken and the foreign exchange risk covered by Forwards were compared with a state if in same transaction Futures contract had been practiced and analyzed how effective the hedging tool had been. The ultimate gain or loss of each alternative, on spot rates, forward rates and futures rates, were compared and the best one is find out for the Neetee in prevailing situations. 3.2 Data Collection Sources 1. Various internet sites and publications of authentic sources, like RBI, NSE and OTCEI. 2. Neetees internal data has been used to find out the Forwards rates it has used in the past 9 months while dealing in foreign currencies Forward Contract Rates: The Forward Rates of the transactions in USD that took place at Neetee Clothing after the date when NSE introduced Currency Futures in the Derivatives market first time in India and matured till May end 2009.During this period 6 such transactions took place. USD INR Futures Rate: The Futures Rate for the transactions took place was obtained from NSEs official website. SPOT Rates: Spot prices were collected from RBIs website.

4. Selecting Suitable Hedging Strategy for Managing Foreign Exchange Risk4.1 Currency option strategies for Import transactions in Bullish Market conditions The foreign exchange market is said to be Bullish if the foreign currency concerned is appreciating against the domestic currency. For example if the Dollar is appreciating against the Rupee, then the market is said to be bullish. In such bullish conditions, the importers who have imported goods on credit will have to pay more than what they would have during the beginning of the period. To hedge against any such risk arising due to the movement in the exchange rates, the following hedging strategies using currency options are available for importers. Period Chosen for Study: The period chosen for the study in which the currency market was bullish or when Dollar appreciated against the Rupee is from July 2008 to October 2008.

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4.1.1

Long Call

Call buying is a strategy used if the investor thinks that the underlying asset will advance in price. It is important, given the risk that the hedgers have a clear idea about where the exchange rate is going and when. For the most part, there are two types of Call buyers: The bullish speculators wanting to take advantage of the leverage options can offer, and. The investor buying a Call as a substitute for buying the stock. Risk/Reward Characteristics Break-even Point: At expiration, the break-even point (B.E.) is equal to the strike price of the Call option plus the Call option's premium. Before expiration, the break-even point is lower. Profit: Profits are unlimited as long as the underlying stock continues in advance. Loss: Losses are limited to the premium paid for the option. At expiration, for every point XYZ is above the strike price, the Call option increases an additional point in value. Changes in implied Volatility: Changes in the option's implied volatility has an effect on the "time value" portion of an option's premium. Thus, a change in the option's implied volatility has the same effect as changing (+/-) the number of days remaining until the option's expiration. 4.1.2 Short Put

The investor writing Put options should believe that the underlying asset is not going down. The maximum profit is limited to the Put premium received and is achieved when the price of the underlying is at or above the option's strike price at expiration. The maximum loss is unlimited. Like uncovered Call writing uncovered Put writing has limited rewards (the premium received) and potentially substantial risk. Risk/Reward Characteristics Break-even Point: At expiration, the break-even point (B.E.) is equal to the strike price of the Put option minus the Put option's premium. Before expiration, the break-even point is higher.

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Profit: Profits are limited no matter how large the advance in exchange rate. Loss: Losses are unlimited. Changes in implied Volatility: Changes in the options implied volatility has an effect on the "time value" portion of an option's premium. Thus, a change in the option's implied volatility has the same effect as changing (+/-) the number of days remaining until the option's expiration. 4.2Currency Option Strategies for Export Transactions in Bearish Market Conditions The foreign exchange market is said to be bearish when the foreign currency is expected to depreciate with respect to the domestic currency. Thus, if the Rupee is expected to appreciate and the Dollar is expected to depreciate, then Bearish conditions prevail. In such a case, the importers are at a gain as they have to pay to the importer less than what they would have when the transaction took place. On the other hand, the exporters are at a loss as they have to pay more to their creditor. Thus, in such a situation there arises a need for the exporter to hedge their foreign exchange risks. The Option hedging strategies available to the exporter in such bearish market are discussed below: Period chosen for studyThe period chosen during which the currency market experienced bearish conditions is from 1st March, 2007 to 31st May, 2007. During this two month period, the Dollar depreciated by 7.7% from 44.287 to 40.87. The mean of the INR/USD spot rates during this period is 42.38 and standard deviation of the spot rates during the period is 1.39. Purchase Put Option Put buying is a strategy used if the investor thinks that underlying asset will decline. The Speculative Put buyer looks for leverage, emphasizing the number of options he or she can purchase. The "Hedger" Put buyer looks to protect a long position in the stock for a period of time covered by the option. Risk/Reward Characteristics Break-even Point: At expiration, the break-even point is equal to the strike price of the Put option minus the Put option's premium. Before expiration, the break-even point is higher. Profit: Profits are unlimited as long as the underlying stock continues to decline. Loss: Losses are limited to the premium paid for the option. Changes in implied Volatility:

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Changes in the option's implied volatility has an effect on the "time value" portion of an option's premium. Thus, a change in the option's implied volatility has the same effect as changing the number of days remaining until the option's expiration. Sell Call Option The investor writing Call options should firmly believe that the underlying asset is not going up. This is because the strategy's break-even point at expiration is a certain distance above the then current stock price. Thus, depending on the option's strike price, writing Call options can be a viewed as a neutral to bearish strategy. Writing uncovered ("naked") Call options is a strategy with very high risk for a small potential return. Risk/Reward Characteristics Break-even Point: At expiration, the break-even point (B.E.) is equal to the strike price of the Call option plus the Call option's premium. Before expiration, the break-even point is lower. Profit: Profits are limited no matter how large the decline in XYZ. Loss: Losses are unlimited!! Changes in implied Volatility: Changes in the option's implied volatility has an effect on the "time value" portion of an option's premium. 4.3 Currency Option strategies for Import transactions in Volatile Market conditions It becomes extremely difficult for an importer/exporter when there is volatility in the currency movements. In such a scenario, hedging the foreign exchange risk becomes even more significant as currency is expected to deviate more from its mean. Volatile exchange rates make international trade and investment decisions more difficult because volatility increases exchange rate risk. Exchange rate risk refers to the potential to lose money because of a change in the exchange rate. Period chosen for study: The period chosen for study is from 1st July 2008 to 23rd December, 2008 The following are the hedging strategies available for importer in volatile market conditions: Long Straddle The long straddle is simply the simultaneous purchase of a long call and a long put on the same underlying security with both options having the same expiration and same strike price. Increasing volatility and large price swings in the underlying security. The hedgers potentially profit from Hedging Strategies against foreign exchange risk using Options a big move, either up or down, in the underlying price during the life of the options. Purchasing only long calls or only long puts is primarily a directional strategy. The long straddle however, consisting of both long calls and long puts is not a directional strategy, rather it is one where the hedger feels large price swings are forthcoming but is unsure of the direction.
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This strategy may prove beneficial when the investor feels large price movement, either up or down, is imminent but is uncertain of the direction. Benefit A long straddle benefits when the price of the underlying moves above or below the break even points. If a large price movement occurs outside of this range, significant profits can be realized. If an increase in the implied volatility of the options outpaces time value erosion, likewise the position could realize a profit. Risk vs. Reward Maximum Profit: Theoretically unlimited to the upside; limited profits on the down side as the stock can only decline to zero. Maximum Loss: Limited and predetermined, but potentially significant, equal to the sum of the two premiums paid (call premium plus put premium). Maximum loss occurs should the underlying price equal the strike price of the options at expiration. Upside Profit at Expiration: (Stock Price at expiration total premium paid) strike price. Assuming Stock Price above BEP at expiration. Downside Profit at Expiration: Strike price - (Stock price at expiration + total premium paid). Assuming stock price is below BEP at expiration. The maximum profit on the upside is theoretically unlimited as there is no theoretical limit on how high a stock price can rise. The maximum downside profit is limited by the stock's potential decrease to no less than zero. Though the potential loss is predetermined and limited in dollar amount, it can be as much as 100% of the premiums initially paid for the straddle. Whatever your motivation for purchasing the straddle is, weigh the potential reward against the potential loss of the entire premium paid. Break-Even-Point (BEP) BEP: Two break-even prices: Call Strike + Premium Paid Put Strike Premium Paid Volatility

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If Volatility Increases: Positive Effect If Volatility Decreases: Negative Effect Long Strangle The long strangle is simply the simultaneous purchase of a long call and a long put on the same underlying security with both options having the same expiration but where the put strike price is lower than the call strike price. Because the position includes both a long call and a long put, the investor using a long strangle should have a complete understanding of the risks and rewards associated with both long calls and long puts. Since the strangle involves two trades, a commission charge is likely for the purchase (and any subsequent sale) of each position; one commission for the call and one commission for the put and commission charges may significantly impact the breakeven and the potential profit/loss of the strategy. The long strangle is similar to the long straddle. However, while the straddle uses the same strike price for the call and the put, the strangle uses different strikes. In the case of the strangle, the put strike is below the call strike. As a result, whereas the straddle expires worthless only if the stock price equals the strike price, the long strangle expires worthless if the underlying price is at or between the strike prices at expiration. The strangle will generally provide more leverage when compared to a straddle as it is normally less expensive to purchase a strangle than a straddle. Increasing volatility and extremely large price swings in the underlying security. The hedgers potentially profit from a large move, either up or down, in the underlying price during the life of the options. Purchasing only long calls or only long puts is primarily a directional strategy. The long strangle however, consisting of both long calls and long puts is a not a directional strategy, rather one where the investor feels extremely large price swings are forthcoming but is unsure of the direction. This strategy may prove beneficial when the investor feels large price movement, either up or down, is about to happen but uncertain of the direction. Break-Even-Point (BEP) BEP: Two break-even prices: Call Strike + Premium Paid Put Strike Premium Paid Volatility If Volatility Increases: Positive Effect If Volatility Decreases: Negative Effect Short Butterfly Spread Long two ATM put options, short one ITM put option and short one OTM put option. Risk / Reward
Hedging Instruments against Foreign Exchange Risk Page 23

Maximum Loss: Limited to the net difference between the ATM strike less the ITM strike less the premium received for the position. Maximum Gain: Limited to the net premium received for the option spread. Characteristics When to use: When you are bullish or bearish on market direction and bullish on volatility, Short put butterflies have the same characteristics as the Short Call Butterfly - the only difference is that we use put options instead of call options. Short butterflies are an excellent strategy if you expect the market to move, however, you are unsure about what direction the market will move. For example, say there is an announcement due regarding earnings or a Government figure to be released. You might be nervous about market activity and expecting a large move in either direction. In these types of situations you might want to consider implementing a short butterfly strategy - even though your profits are limited they are inexpensive to establish therefore giving you a higher return on investment. Short Condor Options A Condor strategy is similar to a butterfly spread involving 4 options of the same type, with the only difference that instead of three, four strike prices are involved. Just like a short butterfly, Short Condors are used when an investor believes that the underlying market will break out of a trading range but are not sure in what direction. Risk/Reward Characteristics Profit Potential of Short Condor Spread :Short Condor Spreads achieve their maximum profit potential at expiration if the price of the underlying asset is within the 2 middle strike prices. Maximum loss: Limited. The maximum loss of a short condor occurs at the center of the option spread. If youve broken the Condor down as 2 call (put) spreads, take the one that has the maximum distance between the strike prices, add the net premium received for the spread and that is the max loss. Maximum gain: Limited. The maximum profit of a short condor occurs on the wings, when the underlying asset is trading past the upper or lower strike prices. It is the maximum of the difference between the lower strike call spread less the higher call spread plus the total premium received for the condor. Risk / Reward of Short Condor Spread Upside Maximum Profit: Limited Maximum Loss: Limited. Break Even Points of Short Condor Spread: A Short Condor Spread is profitable if the underlying asset expires outside of the price range bounded by the upper and lower breakeven points.
Hedging Instruments against Foreign Exchange Risk Page 24

Lower Breakeven Point: Credit + Lower Strike Price Upper Breakeven Point: Higher Strike Price Credit.

5. Analysis and Result5.1 Bullish Market Conditions Long Call Option The Strike Price for the call option is assumed to be 43.5 and the premium paid is Rs.0.2. Thus, the graph shows that till the Spot Price is 43.5, the Net Cash Outflow for the hedger would be Rs.0.2. The Payoff starts increasing at the strike price where the hedger starts exercising his option. Hedger breaks even at the Strike Price plus Premium. The graph shows that when the market is bullish, the hedger will make profits from the strategy which will keep increasing with the bullishness of the market.

Short Put Option The Strike price and the premium are again assumed to be 45.5 and Rs. 0.2 respectively. The party which has bought the put option from the hedger will exercise the option till the Spot Price is equal to the Strike Price. Once the Strike crosses the Spot, the party wont exercise its put option. The Loss for the hedger will keep on increasing as the Spot keeps decreasing. But as we expect the market to be bullish, the hedger will make a constant profit equal to premium as the Spot crosses the Strike.

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Combination of Long Call and Short Put Option Suppose an importer purchases USD call option from a bank at a strike rate of 45.50, & sells USD Put option at a strike rate of 45.50. The premium paid on purchasing call option is 30 paisa and received on selling Put option is 20 paisa. Gain or losses at various levels of exchange rate are shown through the graph. This strategy is aggressive strategy, suited for situations when the Market is appreciating. The gains will be substantial and will keep rising as the Dollar appreciates with respect to Rupee.

5.2 Bearish Market Conditions Long Put The Strike Price is assumed to be the mean of the spot prices in the period under consideration. It is 50.5. The Option Premium is calculated using the Black-Scholes Model

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and it comes out to be Rs. .95 for the Put Option. Based on the above data, we generate the shown graph for the Long Put. Payoff which shows that as the market is bearish, the hedger makes increasing profits. Thus the said strategy is appropriate when the market is expected be bearish. If the market is bullish, the hedger will not exercise the Put Option and thus, make a constant loss equal to the premium paid for the Put option i.e. Rs. 0.95.

Short Call Option The Strike Price for the put option is assumed to be 40.5, which is the mean of the spot prices for the specified period. The Call Option Premium is calculated using the Black-Scholes model and is equal to Rs. 3.5. The hedger makes a constant profit equal to the premium of Rs. 3.5 till the Strike Price is equal to the Spot Price. The Losses are unlimited but are expected only if the market is bullish. Thus, for bearish market, the hedger will make constant profits as the buyer of put option wont exercise his option until the Spot Price is greater than or equal to the Strike Price.

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Combination of Long Put and Short Call A combination of Long Put and Short Call will give a linear return to the hedger, the profit of which is inversely proportional to the Spot Price. As shown by the graph, as the Spot increases the loss increases to infinity and as the Spot decreases the profit increases up to Strike less Spot less Premium. Thus for a bearish market, this strategy is expected to yield positive returns As the Spot becomes greater than the Strike, the yield will be negative, which is least expected in a bearish market. 5.3 Volatile Market Conditions Long Straddle The Strike price is assumed to be the mean of the spot prices in the specified period that is 42.11. The Premium for Call option and Put Option are Assumed to be Rs. 0.5 and Re. 1 respectively. Since the hedger goes long on the Call as well as Put option, the initial investment for the hedger is Rs. 1.5. The Payoff is a V-shaped graph indicating that as the Spot approaches the mean, the return is the least for the investor. However, if the Spot varies largely from the mean, the returns are large. Thus, this strategy is best when the volatility in Exchange rates is high. If the hedger knows that the underlying is volatile, then he can benefit from this strategy. Profit potential is unlimited in the bullish market conditions and it is limited in the bearish market conditions. Long Strangle The call option strike price is assumed to be 45 and the premium on the call option is assumed to be Re. 1. On the other hand, the Put Option Strike Price and premium are assumed to be Rs. 42.11 and Rs. 0.5 respectively. Since the hedger goes long on the call and the put options the initial investment for the hedger is Rs. 1.5. Within the range of the two strike prices of the call and the put options, which is 42.11 to 45, the hedger is expected to incur losses. However, outside this range, the losses start mitigating and ultimately turn to profits. The profit potential is unlimited on the bullish side and is limited on the bearish side.

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Thus, the hedger can apply this strategy when the foreign currency is expected to be volatile, thus making profit if it sways to either side. Short Butterfly Spread The two Short Call Options A and C are assumed to have extreme strike prices at 42 and 44 with premium received on them assumed as Rs. 0.3 and Rs. 0.5 respectively. On the other hand the Call Option B on which long position is held is assumed to have Strike Price of 43 and premium paid on them as 0.33. The ratio of Call Option A, B and C is 1:2:1. We see that as the profit is constantly equal to the initial cash inflow from the net premium received. But as the spot price becomes equal to the strike price of the Short Call Option A that is 42, the profit starts declining till it reaches the Strike Price of Long Call Option B. At this price, the hedger exercises his call option and starts mitigating the losses that he has incurred. The profit potential is unlimited once the spot becomes greater than the Strike price of the Call Option C. Thus, the strategy produces modest profits if there is volatility in the movement of the underlying. Short Condor Spread This strategy is similar to Short Butterfly, involving four call option but with the difference that instead of three, it has four strike prices. The strike price of the two extreme long Call Options A and D are 40 and 45 and the premium received on them being Rs. 0.3 and Rs. 0.7 respectively. On the other hand, the Strike Price of Long Call options, B and C are Rs. 42 and Rs. 43 with premium paid on them being Rs. 0.33 and Rs. 0.4 respectively. The Call Options A, B, C and D are in the ratio 1:1:1:1. The Condor Spread yields limited losses and limited profits. The Profit remains constant at the net premium received on the four options. It starts declining when the spot price becomes greater than Strike Price of A. The maximum loss is incurred when the Spot Price lies in the range between the Strike Prices of B and C after which the loss starts to mitigate. The profit again becomes constant at The initial net premium received as the Spot Price becomes greater than the Strike Price of D. Thus we see that when the underlying that is Dollar is volatile, the Short Condor strategy yields modest but positive returns. 5.4 Comparisons of various hedging toolsThe transactions in Neetee that took place within the period of start at NSE and maturity till July have been taken for comparison with the forward agreements practiced by Neetee in this period. The spot rate movements, Forwards ultimate yield have been compared with Futures rates and tried to reach out to a conclusion if Futures promised to be better hedging tool as compared with spot and forwards market. (a)Futures Vs Spot rates
Here spot rate movement is compared with futures rates for corresponding periods.

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Date

FOTWA RDS RATE

26/09/ 2008 11-022008 18/12/ 2008 25/02/ 2009 15/01/ 2009 12-102008 19/03/ 2009 22/01/ 2009 28/09/ 2009

48.132 5 49.873 8 49.58

SPOT at the contr act date 46.61 97 50.71 56 48.23 93 50.16 71 49.97 17 50.78 78 52.49 97 49.93 15 47.09 5

SPOT RATE at settle ment date 51.886 7 49.73

Durat ion

transact ionn

Gain/l oss on Forwa rds 1.512 8 0.841 8 1.340 7 0.597 9 0.342 5 -0.435

Gain/ Loss on SPOT

SPOT Gain/ Loss

FUTU RES Gain/ Loss

FUTU REs Final Impa ct 1.729 5 0.365 6 0.205 6 0.179

6mnt hs 3mnt hs 3mnt hs 3mnt hs 3mnt hs 2mon ths 1mon th 2mon ths 1mon th

export

5.267

5.267

export

51.546 4 47.625

export

0.965 6 3.307 1 2.492 1 0.155

0.965 6 3.307 1 2.492 1 0.155

3.537 5 0.6

50.765

export

3.102 5 2.51

49.784 2 50.352 8 51.525

50.126 7 48.974

export

-0.24

0.085 0.148 8 1.167 2 0.271 2.757 2

export

50.61

import

0.974 7 -1.616

1.813 8 1.889 7 2.263 5 6.637 2

1.813 8 1.889 7 2.263 5 6.637 2

1.665

51.547 5 48.165

52.195

import

0.722 5 1.992 5 -3.88

53.732 2

export

1.07

Table-1 (b) Futures Vs Forwards


Dat e Tran sacti onn Expo rt du rat ion 6m nt hs 3m nt hs 3m nt hs SPOT at the contract date 46.6197 Futur es 1 Futures SPOT Settlem RATE at ent Date settlemen t date 26-Mar 51.8867 Future s 2 SPOT Gain/ Loss 5.267 FUTU RES Gain/ Loss 3.537 5 0.6 FUTUR Es Final Impact 1.7295

26/ 09/ 200 8 1102200 8 18/ 12/ 200

47.00 25

50.54

Expo rt

50.7156

49.82

25-Feb

49.73

49.22

0.965 6 3.307 1

0.3656

Expo rt

48.2393

47.43 75

27-Mar

51.5464

50.54

3.102 5

0.2056

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8 25/ 02/ 200 9 15/ 01/ 200 9 1210200 8 19/ 03/ 200 9 22/ 01/ 200 9 26/ 09/ 200 9

Expo rt

3m nt hs 3m nt hs 2m on ths 1m on th 2m on ths 1m on th

50.1671

50.18

27-May

47.625

47.67

2.492 1 0.155

2.51

0.179

Expo rt

49.9717

49.74

28-Apr

50.1267

49.98

-0.24

-0.085

Expo rt

50.7878

49.45 5

25-Feb

48.974

47.79

1.813 8 1.889 7

1.665

0.1488

Impo rt

52.4997

50.70 25

28-Apr

50.61

49.98

0.722 5 1.992 5

1.1672

Impo rt

49.9315

48.54 75

27-Mar

52.195

50.54

2.263 5 6.637 2

-0.271

Expo rt

47.095

46.21

27-Oct

53.7322

50.09

-3.88

2.7572

Table-2 Comparing Futures, Forwards & Spot RatesDate FOTW ARDS RATE SPOT at the contract date SPOT RATE at settleme nt date dur atio n tra nsa ctio n Gain/l Gain/Lo oss on ss on Forwa SPOT rds SPOT Gain/ Loss FUTURE FUTUR S Es Final Gain/Lo Impact ss

26/0 9/20 08 11022008 18/1 2/20 08 25/0 2/20 09 15/0 1/20

48.132 5 49.873 8 49.58

46.6197

51.8867

50.7156

49.73

48.2393

51.5464

50.765

50.1671

47.625

49.784 2

49.9717

50.1267

6m nth s 3m nth s 3m nth s 3m nth s 3m nth

exp ort exp ort exp ort exp ort exp ort

1.512 8 0.841 8 1.340 7 0.597 9 0.342

5.267

5.267

-3.5375

1.7295

-0.9656

3.3071

0.965 6 3.307 1 2.492 1 0.155

0.6

-0.3656

-3.1025

0.2056

-2.4921

2.51

0.179

0.155

-0.24

-0.085

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09 12102008 19/0 3/20 09 22/0 1/20 09 28/0 9/20 09

50.352 8 51.525

50.7878

48.974

52.4997

50.61

51.547 5 48.165

49.9315

52.195

47.095

53.7322

s 2m ont hs 1m ont h 2m ont hs 1m ont h

exp ort imp ort imp ort exp ort

5 -0.435

-1.8138

0.974 7 -1.616

1.8897

1.813 8 1.889 7 2.263 5 6.637 2

1.665

-0.1488

-0.7225

1.1672

-2.2635

1.9925

-0.271

1.07

6.6372

-3.88

2.7572

(all rates in INR/USD)

Table-3

Figure-9 Out of some 18 samples, 67% of the time the anticipation regarding prices movements proved to be wrong, emphasizing the need to hedge against currency movement in opposite direction.

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Figure 10- Spot comparison

Figure 11- Head to Head Out of sample of 18, 78% times futures have yielded a better cover for Neetees transactions.

Figure 12- Hedging in Action

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Figure 13- Future, Spot, Forwards Among all 3 futures being the best hedging instrument, faring better to others in minimizing risk. Even in most unfavorable conditions too it has reduced the potential risk. Only once the extremely volatile nature of INR- USD exchange rates resulted in Spot resulting in a potential profit.

6- Findings
The company can hedge itself from foreign exchange risk by either of the instruments; forwards, futures, options, swaps. In Indian context, forwards and options are preferred as short term hedging instruments while swaps are preferred as long term hedging instruments. In a Bearish Market Conditions importers are at a gain as they have to pay to the exporter less than what they would have when the transaction took place. On the other hand, the exporters are at a loss as they have to pay more to their creditor. Hedging strategies available to the exporter in such bearish market are Purchase Put Option or Sell Call Option. In a Bullish condition, the importers who have imported goods on credit will have to pay more than what they would have during the beginning of the period. To hedge against any such risk arising due to the movement in the exchange rates, the following hedging strategies using currency options are available for importer - Long Call & Short Put. In volatile condition the currency movements hedging the foreign exchange risk becomes even more significant as currency is expected to deviate more from its mean. The options available in such volatile situation are-Long Straddle, Long Strangle, Short Butterfly & Spread Short Condor Options.
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Hedging Instruments against Foreign Exchange Risk

7-Suggestions to SMEs
To hedge in Forex market, especially when dealing in USD, SME should opt for Futures contracts in organized market as futures provide a better cover for the exchange risk. Personnel well equipped with nuances of currency derivatives market should be hired so that SME can obtain maximum gain from hedging, and covering maximum possible loss. As futures are available in certain denominations only the maximum possible amount can be hedged by Futures and rest by Forwards. SMEs can continue with Forwards while dealing in currencies other than USD, like EURO, YEN etc. As the amount payable/receivable at SMEs are of relatively smaller in size and also the settlement period is less than a year ,swaps and options are not recommended in their case. Though in future when suited options and swaps may be practiced. Exchange traded currency derivatives provide a better transparency. And recently currency trading in India has also started. So it is prudent to go for this.

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8-References

[1]Corporate Hedging for Foreign Exchange Risk in India- Anuradha Sivakumar and
Runa Sarkar, Industrial and Management Engineering Department, Indian Institute of Technology, Kanpur

[2] Hedging Foreign exchange risk: Selecting the optimal tool- Sarkis J. Khoury, K Hung
Chan

[3]http://www.francoazzopardi.com/research/exchange-rates-and-hedginginstruments.pdf

[4] http://www.rbi.org.in [5] http://texmin.nic.in/ [6] http://www.fedai.org.in/index.asp [7]http://www.thehindu.com/biz/2007/05/14/stories/2007051400671500.ht m [8] Hedging instruments in emerging market economies, By:Sweta Saxena and Agustn Villar :http://www.bis.org/publ/bppdf/bispap44d.pdf

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9-Appendixes 9.1Letter of Approval from Amazines.com

From ArticleSubmission@amazines.com To: Date: apss176@gmail.com Sat, May 8, 2010 at 2:18 AM

Subject :YOUR ARTICLE SUBMISSION - Amazines.com Dear AJAY PAL SINGH, Thank you for submitting your article titled 'Hedging Instruments against Foreign Exchange Risk' to Amazines.com. Your article has been approved. You should be able to find your article on our website within its assigned categories.

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9.2 Letter of Approval from Articlebase.com


from ArticlesBase.com <www@mail.articlesbase.com> To : Date: Subject mailed-by Hello AJAY PAL SINGH, Your article Hedging Instruments against Foreign Exchange Risk has been approved! (ArticlesBase SC #2286678) To view it, please review the following link: http://www.articlesbase.com/currency-trading-articles/hedging-instruments-against-foreignexchange-risk-2286678.html apss176@gmail.com Tue, May 4, 2010 at 5:45 AM Your article has been accepted at Articles Base home6.articlesbase.com

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