A Theoretical And Empirical Study Of Hedging Of Corporate Foreign Debt Risk Management

Borrowing from abroad is the earliest and most important method China has used to utilize foreign fund. So far, medium and long term borrowing greatly contributes to the sustainable, rapid and healthy development of our national economy. With the enlarging scale of foreign debt, many problems have emerged in the structural optimization and the risk management of foreign debt. Foreign debt management has become an important issue that attracts attentions from researchers of financial theory.Risk management of foreign debt for Chinese corporations is the research object of this thesis. The thesis, based upon a comprehensive introduction to the basic situation of foreign debt in China, first analyzes the main characteristics and the potential risks. The thesis then introduces the overall situation of foreign debt management of Chinese corporations and, based upon a classification study of the foreign debt management, discusses the problems existing in foreign debt management from such perspectives as external environment and macroeconomic policies, on-lending financial institutions and the enterprises themselves.Based on the above analysis, this thesis, by choosing the two commonly used hedging methods-interest rate swap and currency swap, elaborates the theoretical models of interest rate swap and its pricing theory as well as the currency swap and its pricing theory, and discusses the application of the theory of interest rate swap pricing and the theory of the currency swap pricing to foreign debt management. Then the thesis introduces the use of this method in the practice of foreign debt management of Hunan Wuling Water & Electricity Development Co., Ltd and the great success achieved. RMBY152 million of interest on foreign debt has been saved by using interest rate swap and currency swap. The successful application of theories to practice shows the applicability and availability of the interest rate swap and currency swap along with their pricing theories in the foreign debt management in Chinese enterprises.Based on theoretical and empirical studies, the thesis puts forward some countermeasures for foreign debt risk management for Chinese enterprises and relevant policies to be adopted by the Chinese government in foreign debt management.