Research On Exchange Risk Management Of Foreign Investment Enterprises In RMB Opening-up Process

With the continuous advance of exchange rate reform and opening pace, the fluctuations of RMB exchange rate are increasing gradually and the market trend of exchange rate becomes increasingly obvious. Meanwhile, in the context of world economy’s integration and deepening of China’s market economy reform, more and more domestic enterprises directly invest overseas. Compared with the general enterprises, foreign investment enterprises have more extensive contacts with foreign currency funds in the process of foreign investment and have more foreign currency assets and liabilities. Therefore, foreign investment enterprises face directly the exchange risk resulting from exchange of RMB and foreign currency. In the past environment of fixed exchange rate system, Chinese enterprises generally lack risk prevention consciousness, risk measurement methods and avoidance strategies which are relatively backward, and the exchange risk management level of foreign investment enterprises is seriously restricted. Exchange risk has become one of the most important factors influencing the development of enterprises under new situations and foreign investment enterprises must attach great importance to it.In the study of the mechanism about foreign investment enterprises exchange risk management, this paper researches from fluctuations of RMB exchange rate,identification of exchange rate exposure, and the size of exchange risk and avoidance methods of exchange risk. Firstly, we investigate the formation reasons of foreign investment enterprises exchange rate. Then we discuss the connotation, classification and influencing factors of exchange rate exposure, and elaborate the measure methods of exchange rate exposure. Based on these, we analyze measure methods of foreign investment enterprises’ exchange risk. Finally we compare the management tools of enterprises exchange risk.In the empirical research of foreign investment enterprises exchange risk management, this paper analyzes by the following path: fluctuations of RMB exchange rate, exchange risk identification of foreign investment, the size of exchange risk,avoidance methods of exchange risk. First of all, we make use of SV family models to describe and to compare the fluctuations character of RMB exchange rate before and after exchange rate reform from different aspects. The results show that exchange rate of RMB express stronger volatility persistence after exchange rate reform comparedwith the state before the exchange rate reform and there is some leverage. Secondly, we construct a bivariate GJR-GARCH model to investigate the exposure of exchange risk of the foreign investment enterprises based on the asymmetry of the exposure of exchange risk and the heteroscedasticity of stock yields and volatility of exchange rate.We find that there are obvious asymmetries and lag on the exposure of exchange rate risk of the foreign investment enterprises, and under different conditions the exposure of exchange rate risk are different. Thirdly, we take advantage of Va R-GARCH model to measure the exchange risk of foreign investment enterprise before and after the revaluation and the financial crisis. The empirical study indicates that the yield of the exchange rate of RMB to US dollar is more volatile compared with other two kinds of currency before and after the exchange rate reform, and the effects of yield sequence of the euro volatility are longer. Further, we figure out the biggest loss on different confidence interval by using the calculation of real examples and use actual data to show the exchange risk of foreign investment enterprises. Finally, we use foreign exchange futures hedging technology to discuss how enterprises avoid the problems of exchange risk. By using minimum variance as measure index for risk, we start from setting marginal distribution model and construct regime switching dynamic Copula model. The study shows that the correlation between yield of the exchange rate of spot and futures is dynamic, and Markov state transition dynamic Copula model can provide guarantee for the accuracy of model. At the same time, according to the parameter estimation results of marginal distribution and state transition dynamic Gaussian copulas, we can calculate the optimal hedging ratio and compare the effect of regime switching dynamic Copula model with other hedging model, which can confirm the advantage of regime switching dynamic Copula model in order to effectively avoid the exchange risk of China’s foreign investment enterprises.Based on these theoretical analysis and empirical research above, this paper makes some recommendations around exchange risk management of financial environment construction, and the identification, the measurement of and the avoidance of exchange rate risk.