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The objective of this project-thesis is to revise the hedging techniques of an industrial company, Circuit Foil Luxembourg, that are used by this company to hedge the Foreign Exchange Risk and the Commodity Price Risk. Throughout its daily life, the company must face these two risks. In order to avoid the possibility of making losses due to these risks, it is necessary for the company to use different hedging techniques.

To perform the revision of these hedging techniques, it is necessary to go through different steps. Firstly, I analyse the company in order to determine all the risks that it is facing and the methods that are used to hedge these risks. Secondly, I perform an analysis of the different financial instruments that can be used to hedge the risks and I determine the ones which correspond the best to the requirements of the company. 

Thirdly, I devote the follow-up to the revision of the technique used to hedge the Foreign Exchange Risk. For that, I develop a theoretical model of a perfect hedge, which uses the hedging technique which I recommend to use at the second step. I also develop some basic principles, that has to be respected for the hedge. I also do an analysis of the functioning of the company, in order to compare the basic principles of a perfect hedge and how it is realised in the company. The purpose is to suggest various improvements, based on what has to be done and what is actually done, in order to enhance the hedge.

Finally, I provide a tool that can be used to calculate the hedges, that have to be done, as well as to track the hedges. This tool is the conclusion of the previous steps. Indeed, this tool is based on the theoretical model developed but this model is applied to the reality of the company and it considers the improvements suggested at the third step.

Hedging techniques --- Commodity price risk --- Foreign exchange risk --- Revision --- Optimization --- Sciences économiques & de gestion > Finance

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In the long view, recent grain price volatility is not anomalous. Wheat, rice, and maize are highly substitutable in the global market for calories, and when aggregate stocks decline to minimal feasible levels, prices become highly sensitive to small shocks, consistent with storage models. In this decade, stocks have declined due to high income growth and biofuels mandates. Recently, shocks including the Australian drought and biofuels demand boosts due to the oil price spike were exacerbated by a sequence of trade restrictions by key exporters beginning in the thin global rice market in the fall of 2007, which turned market anxiety into panic. To protect vulnerable consumers, countries intervened in storage markets and, if they were exporters, to limit trade access. Recognizing these realities, vulnerable countries are building strategic reserves. The associated expense and negative incentive effects can be controlled if reserves have quantitative targets related to the consumption needs of the most vulnerable, with distribution to the latter only in severe emergencies. More-ambitious plans manipulate world prices via buffer stocks or naked short speculation to keep prices consistent with fundamentals. Past interventions of either kind have been expensive, ineffective, and generally short-lived. Further, there is no significant evidence that prices do not reflect fundamentals, including export market access.

Access to Markets --- Commodity price --- Commodity prices --- Cost increases --- Domestic market --- Export market --- Free market --- International Economics & Trade --- International trade --- Macroeconomics and Economic Growth --- Market access --- Market price --- Market prices --- Market volatility --- Marketing --- Markets and Market Access --- Petroleum prices --- Price changes --- Price fluctuations --- Price increases --- Price risk --- Price volatility --- Stocks --- Volatility

Choose an application

• Reference Manager
• EndNote
• RefWorks (Direct export to RefWorks)

In the long view, recent grain price volatility is not anomalous. Wheat, rice, and maize are highly substitutable in the global market for calories, and when aggregate stocks decline to minimal feasible levels, prices become highly sensitive to small shocks, consistent with storage models. In this decade, stocks have declined due to high income growth and biofuels mandates. Recently, shocks including the Australian drought and biofuels demand boosts due to the oil price spike were exacerbated by a sequence of trade restrictions by key exporters beginning in the thin global rice market in the fall of 2007, which turned market anxiety into panic. To protect vulnerable consumers, countries intervened in storage markets and, if they were exporters, to limit trade access. Recognizing these realities, vulnerable countries are building strategic reserves. The associated expense and negative incentive effects can be controlled if reserves have quantitative targets related to the consumption needs of the most vulnerable, with distribution to the latter only in severe emergencies. More-ambitious plans manipulate world prices via buffer stocks or naked short speculation to keep prices consistent with fundamentals. Past interventions of either kind have been expensive, ineffective, and generally short-lived. Further, there is no significant evidence that prices do not reflect fundamentals, including export market access.

Access to Markets --- Commodity price --- Commodity prices --- Cost increases --- Domestic market --- Export market --- Free market --- International Economics & Trade --- International trade --- Macroeconomics and Economic Growth --- Market access --- Market price --- Market prices --- Market volatility --- Marketing --- Markets and Market Access --- Petroleum prices --- Price changes --- Price fluctuations --- Price increases --- Price risk --- Price volatility --- Stocks --- Volatility

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India has pursued an active food security policy for many years, using a combination of trade policy interventions, public distribution of food staples, and assistance to farmers through minimum support prices defended by public stocks. This policy has been quite successful in stabilizing staple food prices, but at a high cost, and with potential risks of unmanageable stock accumulation. Based on a rational expectations storage model representing the Indian wheat market and its relation to the rest of the world, this paper analyzes the cost and welfare implications of this policy and unpacks the contribution of its different elements. To analyze alternative policies, social welfare is assumed to include an objective of price stabilization and optimal policies corresponding to this objective are assessed. Considering fully optimal policies under commitment as well as optimal simple rules, it is shown that adopting simple rules can achieve most of the gains from fully optimal policies, with both potentially allowing for lower stockholding levels and costs.

Accelerator --- Access to Markets --- Aggregate Demand --- Agriculture --- Arbitrage --- Barriers --- Benchmark --- Bidding --- Border Price --- Cash Flow --- Choice --- Closed Economy --- Commodity --- Commodity Price --- Communication --- Consumer Price --- Consumer Price Index --- Consumers --- Consumption --- Costs --- Criteria --- Debt Markets --- Demand --- Demand Elasticity --- Demand Function --- Development Economics --- Development Policy --- Distribution --- Domestic Market --- Domestic Price --- Econometrics --- Economic Theory --- Economic Theory & Research --- Economics Research --- Elasticity --- Emerging Markets --- Equations --- Equilibrium --- Equilibrium Values --- Exchange --- Exchange Rate --- Expectations --- Exports --- Failures --- Fair --- Finance and Financial Sector Development --- Floor Price --- Food Price --- Fraud --- Free Trade --- Incentives --- Income --- Incomplete Markets --- Influence --- Inputs --- Interest --- Interest Rate --- International Economics & Trade --- International Trade --- Lags --- Laissez Faire --- Laissez-Faire --- Macroeconomics and Economic Growth --- Marginal Cost --- Marginal Utility --- Market --- Market Conditions --- Market Economy --- Market Equilibrium --- Market Failures --- Market Power --- Market Price --- Marketing --- Markets --- Markets & Market Access --- Middle-Income Country --- Multipliers --- Open Economy --- Opportunity Cost --- Optimization --- Outcomes --- Output --- Price --- Price Behavior --- Price Change --- Price Elasticity --- Price Index --- Price Instability --- Price Levels --- Price Movements --- Price Policy --- Price Risk --- Price Stability --- Price Stabilization --- Price Uncertainty --- Price Volatility --- Prices --- Private Entity --- Private Sector Development --- Producer Price --- Product --- Production --- Profit Maximization --- Public Policy --- Purchasing --- Rapid Expansion --- Real Income --- Risk Aversion --- Risk Neutral --- Risk-Averse --- Risk-Neutral --- Sales --- Savings --- Security --- Share --- Stabilization Policy --- Stock --- Storage --- Subsidy --- Substitution --- Supply --- Supply Elasticity --- Surplus --- Taxes --- Theory --- Time Value of Money --- Trade --- Trade Barriers --- Trade Policies --- Trade Policy --- Trends --- Utility --- Value --- Value of Money --- Variables --- Volatility --- Welfare --- World Market --- World Trade