The Research On Exchange Rate Risk Management Of FAW-Volkswagen Automobile Co. Ltd

The first chapter is the prolegomenon of this paper; it states the purpose, studying logics, theory construction and the related definition of conceptions, so that the readers can generally know about the paper in advance.The second chapter summarizes the domestic and foreign literature that researched on the exchange rate risk. First, it summarizes the foreign research theories, the literature is related with the exchange rate risk cause and recognition, the drive of hedging the risk of enterprises, the influence of exchange rate risk on enterprises and the hedging operation analysis with the foreign exchange derivative products; second, it summarizes the domestic research theories. By the comparison it can be founded the domestic theories research is more immature than the foreign research, it is in a process of absorption and introduction, in general, the domestic research lags the foreign greatly, so it is urgent to introduce the advanced technology and products to hedge the exchange rate risk and to research on the risk management for enterprises.The third chapter based on the real situation of FAW-Volkswagen Company, it states and analyzes the exchange rate risk management situation and hedging risk strategies with the budget rate.In the first section, it states that the exchange rate risk is mainly induced by payments for importing the equipments and spare parts, in the process of automobile manufacture of FAW-VW, some spare parts and equipment need to import from the foreign companies, especially from Volkswagen Company in Germany, the payments currency is mainly euro, because the exchange rate of RMB against the non-USD currencies fluctuates hard, it brings cost increasing risk with the exchange rate risk to the enterprise, so the exchange rate risk is mainly the exchange rate of EUR against USD. FAW-VW adopts the hedging strategies to hedge the exchange rate risk, fix the importing cost to an extent that can be endured, it is good to draw a long term plan for FAW-VW.In the second section, it introduce the function of budget rate, the budget rate is the account rate or aim rate of an enterprise, it is one level of the profit calculation, for the enterprise that adopt the hedging strategies, drawing the budget rate is based on the forecast for the exchange rate, it can bring important influence on the cost of enterprise.In the third section, it states the conception of Foreign exchange forward, calculation of discount and premium points of forward, advantages and disadvantages of forward, thereby by an operation case of forward in FAW-VW, introducing the factors to choose the forward and how to choose the market chance, lastly evaluating and analyzing the result and influence of these forward transactions.In the fourth section, it states the conception of Foreign exchange option, the articles of the option contract, the influence factor of the premium of the option, thereby by an operation case of option in FAW-VW, introducing the factors to choose the option and how to choose the market chance, lastly analyzing the result and influence of these forward transactions.The fifth section introduces how to set up and optimize the hedging combination structure, set up the hedging management mechanism to regulate the operation and decrease the risk of foreign exchange transactions. In this section states importantly that the aim shouldn't be speculation, the aim of hedging transactions is to hedge the exchange rate risk for FAW-VW, so the correct concepts should be established so that the hedging result can be evaluated through the correct principals and levels.The fourth chapter adopts the tracing error analysis and the enterprise value relativity analysis to exemplify the positive effect of hedging strategies with budget rate in FAW-VW.The first section does the tracing error analysis between the budget rate of FAW-VW and the real market exchange rate, and analyzes the strategy that FAW-VW adopt budget rate level to hedge the exchange rate risk; the second section eliminates the profit part of exchange rate changing, only calculates the exchange changing that brings the risk, descries the result after adjusting; the third section regards the tracing error as variant, through the regression analysis to reflect the tracing error influence on the value of the enterprise.In the conclusion, through analyzing the Foreign exchange hedging products operation of FAW-VW, it can be proved that hedging transactions can exert the important and positive effect, for the automobile manufacture companies that have vast foreign exchange payments it is necessary to adopt the hedging products to hedge the exchange rate risk..