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Measuring and managing exchange rate risk exposure is important for reducing a firm's vulnerabilities from major exchange rate movements, which could adversely affect profit margins and the value of assets. This paper reviews the traditional types of exchange rate risk faced by firms, namely transaction, translation and economic risks, presents the VaR approach as the currently predominant method of measuring a firm's exchange rate risk exposure, and examines the main advantages and disadvantages of various exchange rate risk management strategies, including tactical versus strategical and passive versus active hedging. In addition, it outlines a set of widely accepted best practices in managing currency risk and presents some of the main hedging instruments in the OTC and exchange-traded markets. The paper also provides some data on the use of financial derivatives instruments, and hedging practices by U.S. firms.

Electronic books. -- local. --- Foreign exchange rates -- Mathematical models. --- Risk management -- Mathematical models. --- Finance --- Business & Economics --- International Finance --- Foreign exchange rates --- Risk management --- Mathematical models. --- Banks and Banking --- Foreign Exchange --- Money and Monetary Policy --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- Monetary Systems --- Standards --- Regimes --- Government and the Monetary System --- Payment Systems --- Financial services law & regulation --- Monetary economics --- Currency --- Foreign exchange --- Currencies --- Exchange rate risk --- Hedging --- Foreign currency exposure --- Financial risk management --- Money --- Foreign exchange market --- United States

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During the last decade, a number of new financial instruments and derivative products related to the Greek drachma have emerged in local as well as international capital markets. The paper analyzes the characteristics of these financial instruments which are traded in organized exchanges and over-the-counter (OTC) markets, and evaluates the conditions under which they have evolved. Drawing from legislative and industry developments in the European Union (EU) and the United States, the paper also examines the effects and implications of such developments for local markets and for the conduct of monetary and foreign exchange policies and argues for the need for sound macroeconomic policies.

Banks and Banking --- Finance: General --- General Financial Markets: General (includes Measurement and Data) --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Finance --- Banking --- Financial instruments --- Derivative markets --- Stock markets --- Capital markets --- Banks and banking --- Derivative securities --- Stock exchanges --- Capital market --- Greece

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This paper analyzes the effects of including collective action clauses (CACs) and enhanced CACs in international (nondomestic law-governed) sovereign bonds on sovereigns’ borrowing costs, using secondary-market bond yield spreads. Our findings indicate that inclusion of enhanced CACs, introduced in August 2014, is associated with lower borrowing costs for both noninvestment-grade and investment-grade issuers. These results suggest that market participants do not associate the use of CACs and enhanced CACs with borrowers’ moral hazard, but instead consider their implied benefits of an orderly and efficient debt resolution process in case of restructuring.

Banks and Banking --- Financial Risk Management --- Investments: Bonds --- Interest Rates: Determination, Term Structure, and Effects --- Current Account Adjustment --- Short-term Capital Movements --- International Lending and Debt Problems --- General Financial Markets: General (includes Measurement and Data) --- Financial Crises --- Investment & securities --- Finance --- Economic & financial crises & disasters --- Sovereign bonds --- Bond yields --- Bonds --- Yield curve --- Financial crises --- Interest rates --- Greece

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This paper presents some conventional and new measures of market, credit, and liquidity risks for government bonds. These measures are analyzed from the perspective of a sovereign's debt manager. In particular, it examines duration, convexity, M-square, skewness, kurtosis, and VaR statistics as measures of interest rate exposure; a VaR statistic as the prominent measure of exchange rate exposure; the balance sheet approach (or contingent claims approach), and its consequent probability of default as the most promising measure of credit risk exposure; and an elasticity approach and a VaR statistic to measure liquidity risk. Along with the formulas for the various statistics proposed, we provide simple examples of their application to some common risk valuation cases. Finally, we present an integrated approach for the simultaneous estimation of a portfolio's interest rate and exchange rate risk using the VaR methodology. The integrated approach is then extended to also include N risk factors. This approach allows us to measure the total risk of a portfolio, provided that the volatilities and correlations among the risk factors can be estimated.

Credit -- Econometric models. --- Debts, Public -- Econometric models. --- Electronic books. -- local. --- Government securities -- Econometric models. --- Interest rates -- Econometric models. --- Liquidity (Economics) -- Econometric models. --- Risk -- Econometric models. --- Business & Economics --- Economic Theory --- Risk --- Interest rates --- Credit --- Liquidity (Economics) --- Government securities --- Debts, Public --- Econometric models. --- Debts, Government --- Government debts --- National debts --- Public debt --- Public debts --- Sovereign debt --- Government agency securities --- Government bonds --- Public securities --- Treasuries (Securities) --- Treasury bonds --- Borrowing --- Assets, Frozen --- Frozen assets --- Debt --- Bonds --- Deficit financing --- Securities --- Finance --- Money --- Loans --- Economics --- Uncertainty --- Probabilities --- Profit --- Risk-return relationships --- Banks and Banking --- Investments: Bonds --- Financing Policy --- Financial Risk and Risk Management --- Capital and Ownership Structure --- Value of Firms --- Goodwill --- General Financial Markets: General (includes Measurement and Data) --- Financial services law & regulation --- Investment & securities --- Credit risk --- Liquidity risk --- Market risk --- Exchange rate risk --- Financial risk management --- United States

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