Study About The Application Of Hedging With Foreign Currency Option In The Enterprise A

Before 1991,China implemented the dual exchange rate system.In 1994,China combined the two exchange rate systems.Since 2005,China began to reform the exchange rate system again,establish a floating exchange rate system that based on the supply and demand of market.It referred to a basket of currency and regulated and managed by government.In 2010,China continued to reform the exchange rate system to enlarge the flexibility of the RMB exchange rate.In 2012,the People's Bank of China announced that the exchange rate of RMB to the US dollar was expanded from 5 per thousand to 1 percent.In 2014,the People's Bank of China expanded the exchange rate of RMB to 2% per day.After the completion of several reforms of the exchange rate system,the exchange rate fluctuation has gradually expanded,and the risk of foreign exchange rate faced by enterprises is becoming more and more serious in their daily operation.First of all,this paper introduces the characteristics of foreign currency option,foreign exchange forward,foreign exchange futures,currency swaps and futures option.This paper introduces the pricing theory of foreign currency option and several main hedging strategies.The writer also analyzes the applicable situations,advantage and disadvantages of those hedging strategies.At the same time,this paper introduces the application of foreign currency options in enterprise A,and evaluates the effect of hedging with foreign currency option.Subsequently,this paper points out the problems of enterprise A in the application of foreign currency option,such as low efficiency,facing transaction risk,difficult to choose hedging tools,ignoring the options portfolio and accounting deficiencies.This paper argue that the reasons are unfamiliar with foreign exchange options,short of talents and inadequate supervision.To solve these problems,this paper sum up some suggestions from several aspects.