A Case Analysis Of Foreign Currency Risk Management In Citic Pacific

This case study is to investigate the problem of losses in two major areas of CITIC Pacific, from KODA value and risk management of these two aspects to analyze. With B-S option pricing method to determine the value of the initial contract KODA. When it is determined that the value is negative after KODA, then Monte Carlo simulation for a more precise calculation of the losses KODA thus obtain more accurate loss value.This part of risk management, risk characteristics from management issues and KODA CITIC Pacific company exists for analysis. KODA contracts are risky characteristics, from the risk characteristics of KODA contract to analyze the loss of CITIC Pacific. Citic when conducting risk management, exposed many problems, identify the problems of the company itself and the problems the company during the management of foreign exchange exposure.Finally, the solution to the problem, namely the Australian dollar per month to be purchased for hedging and losses obtained using Monte Carlo simulation to hedge. The program uses two methods for hedging, hedging methods first, using the model method, second method is to use fully hedging method. In the process of implementation of the program by comparison to the results of hedging by the end of October 2008, and found the effect of hedging complete hedging method is better than the effect of hedging hedging model law. Therefore, spent a full set Conservation Law for all losses Citic Pacific KODA agreement within the validity period will be hedging, and hedging results obtained, suggest improvements program.The significance of this case study is: First, for the enterprise to build a more complete reference exchange risk management mechanisms. Secondly, to provide enterprises with a more convenient and practical and effective hedging method. Again, as in hedging losses, the company offers a solution to the losses. Finally, for the purchase of KODA products at a loss, the company offers a workaround.