The Research On The Forex Risk And Evasion Mechanism Of Enterprises In China

From July 21^st ,2005, China began to carry out a new managed floating exchange rate mechanism, based on market supply and demand, adjusted with reference to a basket of currencies. The RMB exchange rate would no longer be pegged to US Dollar singly, which leads to a more flexible mechanism. Companies are put in the front edge of exchange rate risk by the uncertainty of exchange rate fluctuations. In order to evade the exchange rate risk, the mechanism of future foreign exchange settlement,non-delivery future transaction of RMB emerged.This essay begins with the basic theory of exchange rate risk, using theoretical and empirical analysis to measure the Chinese companies' exchange rate risk. A great deal of data of listed companies is collected from Wind information system and China Financial Yearbook, and the classical econometrical model to measure the companies' foreign exchange risk, which is provided by Jorion. Based on this, the essay delves into various mechanisms of evading exchange rate risk used in Chinese companies, and puts forward corresponding administrative policy suggestions.In the first part of this essay, the main topic is put forwarded. The purpose, research method and writing frame are introduced. The second part is literature review. The basic viewpoints of foreign exchange risk and mechanism to evade it are reviewed. Based on this, the author generalizes and appraises the research which has been done by others. In the third part, the theoretical and empirical analysis of exchange rate risk is developed. The author introduces the basic concept about exchange rate risk and the method of measuring such risks, establishes the econometrical model, and makes the empirical research on such risk faced by the companies. The significant level of the risk suffered by the companies is well proved in the way of regression analysis. The fourth part of the essay makes a theoretical and empirical comparative research on the two main exchange rate risk evading mechanisms, as future foreign exchange settlement , non-delivery future transaction of RMB. Analyse the problems exited, tests the interest parity conditions of future foreign exchange settlement using the empirical data especially, and introduces the principles and development prospect of other financial derivatives. The best control of exchange rate risk is discussed in the fifth part, especially the best hedging rate of foreign currency futures evasion mechanism. Last part is the conclusion. In this part, the author provides some suggestions of managing the exchange rate risk, and discusses the prospects on the feasibility of launching the foreign currency future transactions at present.