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Hedging FX risk for Indian exporters and importers

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Invited Lecture presented at GreatLakes Institute of Management, Chennai, India, 7 February 2017

Published in: Economy & Finance
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Hedging FX risk for Indian exporters and importers

  1. 1. Hedging Foreign Exchange Risk for Indian Exporters and Importers Uwe Wystup Version 2017
  2. 2.         
  3. 3. Overview    
  4. 4. 50 55 60 65 70 75 80 85 90 95 100 23.06.2004 11.09.2004 30.11.2004 18.02.2005 09.05.2005 28.07.2005 16.10.2005 04.01.2006 25.03.2006 25.06.2006 20.09.2006 09.12.2006 27.02.2007 18.05.2007 07.08.2007 26.10.2007 14.01.2008 03.04.2008 22.06.2008 10.09.2008 29.11.2008 17.02.2009 08.05.2009 27.07.2009 15.10.2009 03.01.2010 24.03.2010 12.06.2010 31.08.2010 19.11.2010 07.02.2011 28.04.2011 17.07.2011 05.10.2011 24.12.2011 13.03.2012 01.06.2012 20.08.2012 08.11.2012 27.01.2013 17.04.2013 06.07.2013 24.09.2013 13.12.2013 03.03.2014 22.05.2014 10.08.2014 29.10.2014 17.01.2015 07.04.2015 26.06.2015 14.09.2015 03.12.2015 21.02.2016 11.05.2016 30.07.2016 18.10.2016 06.01.2017 EUR/INR 2004 - 2017
  5. 5. FX Risk - 3 simple questions
  6. 6. FX Risk - 3 further questions
  7. 7. FX Risk - 3 harder questions
  8. 8. FX Risk - 3 questions about the core responsibility of management
  9. 9. 55 60 65 70 75 80 85 90 Thursday23July2015 Sunday14June2015 Wednesday6May2015 Saturday28March2015 Tuesday17February2015 Tuesday13January2015 Friday5December2014 Monday27October2014 Thursday18September2014 Sunday10August2014 Wednesday2July2014 Saturday24May2014 Tuesday15April2014 Friday7March2014 Monday27January2014 Wednesday25December2013 Thursday21November2013 Saturday19October2013 Saturday14September2013 Tuesday6August2013 Friday28June2013 Monday20May2013 Thursday11April2013 Sunday3March2013 Wednesday23January2013 Saturday15December2012 Tuesday6November2012 Friday28September2012 Monday20August2012 Thursday12July2012 Sunday3June2012 Wednesday25April2012 Saturday17March2012 Tuesday7February2012 Friday30December2011 Monday21November2011 Thursday13October2011 Sunday4September2011 Wednesday27July2011 Saturday18June2011 Tuesday10May2011 Friday1April2011 Monday21February2011 Thursday13January2011 Sunday5December2010 Wednesday27October2010 Saturday18September2010 Tuesday10August2010 Friday2July2010 Monday24May2010 Thursday15April2010 Sunday7March2010 Wednesday27January2010 Saturday19December2009 Tuesday10November2009 EUR-INR 2009-2015
  10. 10. FX Risk Problem         
  11. 11. FX Risk – Traditional Hedging Methods  
  12. 12. FX Risk – Advanced Hedging Methods  
  13. 13. Structured Products Workshop: Shark Forward   
  14. 14. Structured Products Workshop: Shark Forward Currency pair EUR-INR Notional Company buys 1 crore EUR Spot reference 70 1 year forward rate 75.15 Expiry 1 Year Worst case 77.00 (185 pips above forward) Trigger 61.00 (900 pips below spot) Final exchange rate Min(worst case, spot at expiry) if trigger not touched Upfront premium zero
  15. 15. EUR buyer Shark Forward     60 65 70 75 80 85 58 60 61 63 64 66 67 69 70 72 73 75 76 78 79 81 82 84 exchangerate spot at maturity Shark Forward (EUR buyer) shark rate outright forward rate
  16. 16. FX Risk – Dangerous (but Tempting) Hedging Methods  
  17. 17. FX Risk Problem         
  18. 18. FX Risk – Traditional Hedging Methods  
  19. 19. FX Risk – Advanced Hedging Methods  
  20. 20. Structured Products Workshop: Shark Forward   
  21. 21. Structured Products Workshop: Shark Forward Currency pair EUR-INR Notional Company sells 1 crore EUR Spot reference 70.00 1 year forward rate 75.15 Expiry 1 Year Worst case 73.00 (215 pips below forward) Trigger 86.75 (1675 pips above spot) Final exchange rate Max(worst case, spot at expiry) if trigger not touched Upfront premium zero
  22. 22. EUR Seller Shark Forward     70 72 74 76 78 80 82 84 86 88 90 70 72 73 75 76 78 79 81 82 84 85 87 88 exchangerate spot at maturity Shark Forward (EUR seller) shark rate outright forward rate
  23. 23. Target Forward (TRF)
  24. 24. Target Redemption FWD
  25. 25. FX Related Litigation
  26. 26. Debt Management Case Studies  
  27. 27. Currency Related Swap (CRS) Example
  28. 28. Debt Management Case Study: City of Linz vs. BAWAG
  29. 29. Debt Management Case Study: City of Linz vs. BAWAG
  30. 30. Debt Management Critical Questions
  31. 31. EUR-INR Volatility Surface 24 July 2015
  32. 32. Bloomberg OVDV example
  33. 33. EUR-INR ATM and RR 2014-2015
  34. 34. Selected Publications
  35. 35. FX Options Related Publications
  36. 36. Contact us www.mathfinance.com m@thfinance.com +49 700 MATHFINANCE +49 69 3740 3492 Frankfurt London Singapore

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