Based On The Var Methodology China's Foreign Exchange Risk Management Study

With the ending of fixed foreign exchange system, more and more currencies fluctuate according to the supply and demand of the market, or to other currency's float. In July 2005, the RMB exchange system has been changed. The foreign exchange rate becomes unpredictable with the reform of RMB system. The changes make the enterprises face to the unpredictable exchange rate risk. It is necessary for the enterprises to find a good way to manage the risk. VaR method has been a popular tool to measure and manage the risk. It is scientific, useful and exact. It can be used to analyze the risk of the transaction and investment. The manager can adjust the stratagem to avoid the risk according to the VaR value.We focus on the foreign exchange risk management in enterprises, combining the method of VaR and the foreign exchange risk management in enterprises, analyzing the transaction risk and the whole management risk, and set up a new system to manage the foreign exchange risk with the method of VaR. At first, we introduce the general situation of foreign exchange risk management in our country and the measure methods for the foreign exchange risk. Then we expatiate the method of VaR, and analyze the way to measure the foreign exchange risk of transaction and the whole enterprise. Finally we set up a system to manage the foreign exchange risk in enterprises.