Approach To The Exchange Rate Risk Precautionary Mechanism Of Multinational Bank Based On Financial Globalization

With the 21st century coming, economic integration and financial globalization are the evident character and the historic tendency of the world. The flow of international capital offsets the lack of fund for developing country and brings much risk. Especially since the breakdown of the Bretton Woods system broke down in the earlier 1970's, the fluctuant exchange rate system took place of the fixed exchange rate system, the exchange rate changed more and more. At the same time,multinational banks face the enormous exchange rate because of large-scale development, almightiness of its business and multicurrency intervention.Under the background, it has already become the necessary theoretical issue to be studied deeply and the practical problem to be solved all-sided, which is about how to manage the exchange rate risk for multinational banks that hold foreign option position.The thesis is about taking precaution against the exchange rate risk of the multinational bank. At first, it sums up the multinational bank and the exchange rate risk briefly, and then, explains several popular kinds of exchange rates determined theories in the world. After analyzing the effect factors on the exchange rate, the paper discusses the exchange rate prediction method which is the foundation of the exchange rate risk management. Next, we study the precaution mechanism of exchange rate risk of multinational banks and put forward to the used regular foreign currency position control methods and the tactics of exchange rate risk management. And it emphasizes on studying application of several basic financial derivative tools in the exchange rate risk management. At last we testify an example that is a loan business about multinational banks to obtain the data relevant to the exchange rate. Then we probe into how to manage effectively the exchange rate risk and the operation strategies by use of the pricing model of the financial derivatives tools(Forward Exchange Contract,Foreign Exchange Future Contracts,Foreign Exchange Option,Foreign Exchange Swat), table and regression analysis etc. In the end, the text analyzes and compares the exchange rate risk management effect of the several derivatives tools of multinational banks in order to put forward to the reference for the exchange rate risk of multinational banks.