Non International Reserve Currency Risk Management

After the broke out of American subprime crisis, the structure of world economyhas changed greatly. The economy in America and Europe was crippled by subprimecrisis and debt crisis. Even in "BRICKS" countries, their economic growth rateslowed down from former high increasing. Compared with the depression of formereconomic "train heads", countries in South America and ASENA are showing greatlypossibility of high speed growth for their excellent geographic condition and abundantnatural resources. Now, they have becoming a hot place for investment funds fromother countries of the world. China also pay fully attention on the development ofASENA countries and make a strategy to deepen the cooperate relationship with them.It can be predicted that the holding amount of these countries currency will be largerin our enterprises and financial firms in the near future and the risk management ofthese countries’ currencies, mostly non international reserve currency, will become atough issue for them.According to these opportunities and problems, this paper aims to research therisk management method for the exchange rate risk of non international reservecurrencies and chooses Lao PDR, Myanmar and Thailand as research target. The firstpart of this paper study the basic theory including exchange arrangement theory,exchange rate risk management theory and VaR model theory. The second part of thispaper identifies the regime of non international reserve currency and the character ofnon international reserve currency. In the third part, this paper use IMF taxonomiesand the natural classification to describe the exchange market and exchange ratearrangements in Lao PDR, Myanmar and Thailand. In the fourth part, this paperanalyzes the exchange rate risk exposure according to the business of Chineseenterprises and financial firms in these three countries. Fifthly, this paper use statisticdata and VaR model to quantize the exchange rate risk of Laotian Kip, Myanmar Kyatand Thai Baht. Finally, this paper suggest some method to manage the exchange rate risk of non international reserve currency.