The Measurement And Management Of Foreign Exchange Risk

With China’s rapid economic development, the process of economic glob-alization, promote the integration of the world, financial theory innovation and the constant perfection of the information technology, the process of RMB ex-change rate market is gradually accelerating, foreign exchange trading varieties are increasing, the scale is gradually expanded, the volatility is enhanced, all these changes have raised challenges for Chinese enterprises. How to effectively prevent and control foreign exchange risk, establish a sound and reasonable risk management system has become a major problem for China’s enterprises, especially for the banks, to face.This article has combed over the development of the foreign exchange market, introduced the basic concept and thought of risk management, focused on the use of sensitivity analysis and VaR method. In order to carry on the empirical analysis, this paper selects the last two years the dollar against the RMB rate of return, firstly, do some basic statistical analysis, normality, stochastic analysis of the sample data, find out that the data does not have the normality and autocorrelation.Then use Historical Simulation Method, Normal Model Method, Monte Carlo Simulation Method to estimate the VaR. By adopting Kupiec statistics as a measure of model effect testing standard, we find that the Historical Simulation Method has the best result,on the contrary, Normal Model Method is the worst. When the historical data is incomplete, the Monte Carlo Method can get good results.This article also introduces foreign exchange derivatives, such as futures, options, forwards, swaps. Financial risk management needs the joint efforts of enterprises, banks, regulators. Only by establishing good internal and external environments, developing qualitative analysis to quantitative analysis, can we really make a difference with various risk management methods.