Study Of Foreign Exchange Risk Hedging Strategy And Evaluating With Small Enterprises In China

China’s new round of exchange reform of the RMB exchange rate has made theflexibility of RMB exchange rate fluctuate more greatly, which further increases China’sexport-oriented small and micro businesses’ exchange rate risk. China’s export-oriented smalland micro businesses may be eroded If the appreciation of the RMB rises to a certain extentduring the signed orders to exchange earnings process. Therefore, it has a very importantsignificance to study how to avoid foreign exchange risk faced by the small and microbusinesses. The article systematically reviews the research results at home and abroad on theforeign exchange risk management. This paper points out the inevitability of the exchangerate risk the small and micro businesses faced. This paper systematically summarizes threeforeign exchange risk aversion theory, which is the traditional hedging theory, Working’stheory of selective hedging theory and portfolio hedging, then and based on the theory ofportfolio hedging, designs four hedging strategies.Then collect477foreign exchange transaction data as the analysis from May22,2010toMay21,2012and take four different periods NDF, including30days,60days,90days and180days. Use Sharp coefficients and minimum variance to test the performance of these fourhedging strategies. Constant hedge and continuity hedging strategy hedge effect is better thanno hedging strategy, the fixed hedge short-term hedge effect and continuity hedge long-termhedge are better. Fixed-continuity hedging hedge effect is very significant in the60-dayperiod. Just identify the appropriate hedge ratio and appropriate hedging strategy, the SMEswill be able to control the risk of foreign exchange rate in a certain range, attaining hedgingeffect.Finally, in response to these empirical conclusions, this paper gives some advice aboutspeeding up the concept of change, strengthening personnel training and the development of avariety of financial derivatives from the perspective of the SEMs and regulatory authorities.