Value at Risk &amp; Transaction Exposure: An Inter-Temporal Lexicographic Permutation of a Six-Currency Portfolio

Khazeh, Kashi; Salimian, Fatollah; Winder, Robert C.

doi:10.2139/ssrn.1933264

Cited by 2 publications

(2 citation statements)

References 10 publications

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“…Value at risk is a well-known method to assess transaction exposure. According to Khazeh, Salimian, Winder (2012) the Value-At-Risk (VAR) technique has become one the most accepted approaches to assessing transaction exposure. The VAR methodology can be engaged to appraise the maximum likely loss on the value of the MNC's net cash flows denominated in one or more foreign currencies for a given time period.…”

Section: Literature Reviewmentioning

confidence: 99%

The Exposure of Albanian Firms to the Exchange Rate Risk and Its Hedging

Heta

Mulleti

2013

AJIS

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Foreign exchange is among the most important risks facing most economic agents, whether they are corporations, institutional investors, or households. In recent times, the volatility of these rates has increased substantially and, as a result, agents have a greater need to hedge against these risks. In today's business environment, firms find it necessary to hedge the exchange rate risk, which has a big impact in their earnings. This risk affects not only firms engaged in international business but even those operating only in their local markets. Albanian businesses face a high rate of exchange rate risk due to strong business relationships with neighbor countries and broader. Hedging this risk is difficult because in a developing country like Albania, currency derivative market does not exist. The nonfunctioning of Tirana stock exchange, the fact that commercial banks still do not offer forward contract widely, and the lack of financial knowledge among businesses' representatives are among the reasons that makes hedging so difficult in our country.This paper investigates to what extend Albanian businesses face exchange rate risk, and how these businesses hedge it. We have considered a case study from an Albanian firm and found out the ways they protect their earnings from this risk. One concerning finding is that Albanian firms do not hedge financially the exchange rate exposure, even though they have a large degree of exposure. At the end we conclude by developing a framework for currency hedging to be applied from these firms in order to reduce their currency exposure.

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Section: Literature Reviewmentioning

confidence: 99%

The Exposure of Albanian Firms to the Exchange Rate Risk and Its Hedging

Heta

Mulleti

2013

AJIS

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“…Mohammadi and Akhtekhane (2012) estimate the risk associated with the U.S. dollar/rial exchange rate using VaR. Mabrouk andAloui (2011), Rejeb et al (2012) and Khazeh and Winder (2010) also employ VaR methodology to estimate the exchange rate risk associated with multiple currencies and currency portfolios. Artzner et al (2001) were first to explore the concept of conditional VaR.…”

Section: Introductionmentioning

confidence: 99%

Estimated Impact of Covid-19 on Exchange Rate Risk of Multinational Enterprises Operating in Emerging Markets

Arvi

Manakyan

Khazeh

2023

IJEFI

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Multinational enterprises (MNE) operating in emerging countries are exposed to various types of risk. Exchange rate risk is an important and anticipated part of MNE’s total risk exposure, with a variety of tools available to mitigate that risk. In this study, we focus on transaction exposure of cash flows in eight distinctive emerging market currencies and employ the Modified Value-at-Risk (MVaR) model to estimate the maximum one-period loss during an eighteen-month period spanning pre- and post-Covid-19 periods. The predicted losses by MVaR are then compared to the ex-post results, to identify any differences in the pre- and post-Covid-19 periods and to determine the need for adjustments in hedging strategies by MNEs during similar global crises. The motive of this research is to understand the limitations of hedging and what MNEs can do to mitigate transaction exposure risk. The results provide insights on whether MNEs should hedge their currency risk or not. The COVID-19 pandemic did impact all firms globally, so this study is relevant and pertinent as firms plan their post-pandemic growth.

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Value at Risk & Transaction Exposure: An Inter-Temporal Lexicographic Permutation of a Six-Currency Portfolio

Cited by 2 publications

References 10 publications

The Exposure of Albanian Firms to the Exchange Rate Risk and Its Hedging

The Exposure of Albanian Firms to the Exchange Rate Risk and Its Hedging

Estimated Impact of Covid-19 on Exchange Rate Risk of Multinational Enterprises Operating in Emerging Markets

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