Foreign Exchange Rate Risk Management For Multinational Enterprises

China's growing multinational enterprises ( MNEs) have to confront to foreign exchange rate risk ( FX risk ) since the entry of WTO and especially after the reforming of exchange rate regime in July, 2005. The connudum of FX risk management is also one of the most important issues of any MNE and an important one in international economics.The first chapter of this thesis is introductory which illustrates why this topic is chosen, and makes a review on literature. The second chapter sets up a theoretical framework and designs a trinational model to analyze the forming mechanism of FX risk, optimal hedging ratio, FX risk pass-through, innovation strategy and hedging strategy. The results show that elasticity of FX exposure is relative with the international structure of firm's revenue and cost, that the status and pricing capability of firm on target market can improve its ability of FX risk pass-through, and that all the exposures should be hedged according to the optimal hedging ratio.The third chapter discusses the operational strategy and hedging tools to manage FX risk. The thesis decomposes FX risk into translation risk, transaction risk, economic risk, and analyzes the operational and financial strategies such as subsidiaries network netting, transfer pricing, and innovation, etc.The fourth chapter discusses the international experiences on MNEs' FX risk management. We refer to the researching results of the task force of the Group-31, mainly with non-financial top MNEs including GM, Duport etc.. We also discuss the experiences of other firms in USA. Japan and Chinese Taiwan.The fifth chapter gives some advices on China's fast-growing international enterprises based on the results of former chapters. These advices include: setup of working mechanism, global diversion, portfolio management, hedging of FX exposure, innovation investment, pass-through and cost reduction, etc.. Finally we provide a case firm which has managed its FX risk successfully.The main contribution of this thesis is that it establishes the trinational model analyzing the FX risk mechanism and presents a complete research framework, based on some other theoretical results, by which we can derive some operational advices for China's growing MNEs.