Research On Risk Management Of Foreign Exchange Cumulative Options(KODA)

Since the 21 century,the process of world economic integration has been continuously promoted,the internationalization of Chinese enterprises has been accelerated,and the scale and number of transnational investment and overseas mergers and acquisitions have been expanding day by day.Transnational investment is different from domestic investment.In the process of internationalization,enterprises must pay special attention to asset prices,commodity prices and exchange rate risks in cross-border operations,and take effective measures to strengthen the management of these risks in an all-round way.In order to effectively control operational risks,many enterprises turn to financial derivatives to avoid commodity and foreign exchange risks.However,the high risk of the financial derivatives market puts forward higher requirements for the risk control ability of these enterprises.The complex trading structure,high leverage ratio and imperfect internal control mechanism make derivatives trading implied risk,which makes the operation of derivatives risk aversion itself has high risk,if the operation is wrong,it is likely to bring huge economic losses to the enterprise.In view of this,enterprises must deepen their understanding of the financial derivatives market and the risk formation mechanism of complex derivatives,improve their ability to identify and control the risks of complex derivatives,and ensure that enterprises can maintain efficient and sound operations in cross-border investment.This paper mainly studies the risk management method of foreign exchange cumulative option(KODA),which is a financial derivative with extensive market influence,and analyzes the application of relevant risk control methods in enterprise management practice combined with "CITIC Pacific case".The content of the paper is divided into six chapters.The first chapter introduces the research background and significance of the paper,and introduces the current research situation and main research contents and methods at home and abroad.The second chapter introduces the definition,trading structure and risk characteristics of foreign exchange cumulative options products.The third chapter focuses on the risk identification and control of foreign exchange cumulative option products,mainly from the two dimensions of product pricing and risk control,and introduces the measurement methods of option pricing and risk identification respectively.and the specific methods of risk control are introduced accordingly;the fourth chapter mainly focuses on the case analysis and empirical study of foreign exchange cumulative option products.First of all,it describes the background of Citic Pacific's signing of the Australian dollar cumulative redeemable forward contract,the specific content of the contract and the treatment of the contract risk.After that,the pricing of the contract is studied by using Monte Carlo simulation method,and the market risk faced by the contract is quantitatively analyzed with the help of VaR model.The conclusion shows that the value of the contract is negative,which indicates that Citic Pacific is facing losses at the beginning of the contract.At the same time,the income and risk of the contract are asymmetric,the income is limited and the risk is unlimited.Finally,on the basis of the previous empirical analysis results,this paper puts forward the corresponding risk control methods and procedures,in order to reasonably control the risks faced by enterprises;the fifth chapter,according to the relevant analysis results and experimental results,this paper puts forward some suggestions on how to improve the risk control ability of Chinese multinational enterprises.The theory and case study of this paper show that:first,foreign exchange cumulative option is a kind of financial derivative product with limited income and unlimited risk,and multinational enterprises selling foreign exchange cumulative option products will bring great risk;second,the pricing of foreign exchange cumulative options is an important factor affecting their participation risk.There is the problem of unreasonable pricing of foreign exchange cumulative options,and the foreign exchange cumulative options sold by CITIC Pacific are doomed to suffer heavy losses when they are sold.Third,in order to effectively control the risk of complex financial products,Chinese multinational enterprises should treat complex financial products cautiously,improve the risk management process from pricing,risk identification and risk control,select effective measurement models such as VaR for risk quantitative analysis of complex financial products,and reasonably select hedging products according to the results of quantitative analysis,so as to continuously improve their risk management ability for complex financial products.In order to effectively reduce the risk and promote the sound operation of the enterprise.