| Nowadays, the exchange rate and interest rate are fluctuating seriously in international financial markets. Financial institutions and corporations are facing a great of risks. The crisis of international debt and the shifting of capital flow put impact on the safety and liquidity of banks'assets. In order to reduce the operating cost, evade the assets risk, guarantee the profitability and the security of enterprises and banks, various innovative financial instruments have appeared. Swap is a kind of common financial derived products in financial market at present. Since swap was appeared at the beginning of the eighties of the 20th century, the amount of swap trades have increased constantly, and more and more participator join in the market. Swaps have already become one of important tools for risk management on the international financial market.With the opening of financial markets and the reforming of the exchange rate system at present, the operation risks which the financial institutions of our country face are strengthening. And the banks face a lot of problems, such as the high operating costs, poor quality assets, the profit drops seriously. At the end of 2006, foreign banks began to operate the services of RMB, the competition pressure which the commercial banks of our country face is strengthened. So the banks of our country need to improve the level of their operation, innovative financial instruments can bring new profit point, the currency swap is a kind of important tool among them.The currency swap also has important meanings to enterprises of our country. At present, our country is setting up and improving socialist market economy system, market economy requires us to integrate with the international economy, and to handle affairs according to laws of the market. With the exchange rate system reform of RMB and Chinese financial market is gradually opening, the enterprises of our country will face financial risks. For these reasons, enterprises need currency swap to reduce the cost and risks. So this paper starts with the theoretical research of the currency swap, it analyzes the applications in reality, especially through the study on the Chinese case, explaining the functions of saving the cost and reducing risks of enterprises; at the same time, it also analyzes exchange rate and credit risks faced while launching the business of the currency swap of commercial bank, and provide the measures which the commercial bank should take under various risk situations. On this basis, dissects the necessity and possibility of develop the swaps markets in our country, and put forward some one's own views and suggestions on the development.This paper is divided into six chapters; the structure and basic content are as follows:Chapter one analyzes the impacts on every economic main body in our country after the reforms of the system of exchange rate, it divided into three parts altogether. Part one have reviewed the process of exchange rate system reform; Part two is analyzed the risks face by the enterprises after the reform of exchange rate system; Part three has analyzed the challenges to the commercial banks. After the system reform of exchange rate, the exchange rate risks of the assets account and trade account of commercial bank increase at the same time, liquid risk and other risks also increase, meanwhile, the earning ratio of the bank credit products is reduced, the demand for innovative financial instruments of enterprises increases, all of these need the bank's effective new products. By the analysis of this chapter, we can draw the conclusion that China need currency swap. Chapter two is a summary of currency swap. It makes an introduction to the definition, development, type and so on. This chapter analyzes the reason of the currency swap's appearing and the function of risk management by cases analysis.Chapter three introduces how to pricing the currency swap, it is divided into three parts. Part one has recommended the influencing factors of the price; Part two and three have introduced two methods of how to price the swap.Chapter four analyses the application of the currency swap in some fields by real cases of China. While analyzing these cases, investigate economic environments and decision goals faced when enterprises making decision at first, then analyzed and compared the cash flows and costs of the enterprises in the situations that they use currency swap or not, and last we made the conclusion that enterprises can use currency swap to evade the risk and lower costs. At last this chapter summarized the steps of how to operate currency swap in China briefly.Chapter five analyses the risks the banks meet, especially the market risk and credit risk. This chapter uses figures and quantity method to analyze the risks. Then the second part has proposed the measures that the commercial banks should take to against these risks. For the market risk, we offer the suggestion of setting up exchanging storehouses to find proper tools to meet the banks'need; it also suggest the bank to improve the predict accuracies of the exchange rate and interest rate at the same time. To control the credit risk, the bank should establish the system of supervising in credit risk, shift the risks to those who can bear larger risks, and use various methods to prevent and reduce the credit risks.The last chapter analyzes the current situation of currency swap in china, and put forward my own view and suggestions on it. This chapter has carried on special argumentation to the reasons of the situations in china. And as the gradual completion of the financial environment of our country and development of computer communication technology, it is feasible to develop currency swap in our country; But it's need a series of improvements: the improvement of banks, a well supervisory system of financial market and so on.This paper have several characteristics: (1) proceed from China's present financial environment, analyses and discusses how to develop the Chinese currency swap market. (2)This paper has studied both sides of the currency swap. The researches often only pay attention to the study on one party——enterprises, and has ignored another one——the Banks. This paper study on the basis of both sides, and analyzes both sides'profits and risks in currency swap. |
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