Usage of Option Contracts for Foreign Exchange Risk Management
Today in Romania, in the context of the liberalization of the capital account and under a floating exchange rate (official is a managed floating currency regime established by National Bank of Romania) the foreign exchange rate is very volatile. In consequence the financial institutions, corporation...
| Main Authors: | , |
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| Format: | Article |
| Language: | English |
| Published: |
General Association of Economists from Romania
2007-06-01
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| Series: | Theoretical and Applied Economics |
| Subjects: | |
| Online Access: | http://www.ectap.ro/articole/226.pdf |
| _version_ | 1818243117414875136 |
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| author | Daniel Armeanu Florentina-Olivia Balu |
| author_facet | Daniel Armeanu Florentina-Olivia Balu |
| author_sort | Daniel Armeanu |
| collection | DOAJ |
| description | Today in Romania, in the context of the liberalization of the capital account and under a floating exchange rate (official is a managed floating currency regime established by National Bank of Romania) the foreign exchange rate is very volatile. In consequence the financial institutions, corporations and, especially, the importers and exporters have to deal with a big exposition of currency risk related with their activities. Financial institutions and corporations today must adopt new roles in order to compete successfully in the explosively evolving foreign exchange markets. The methods, instruments and techniques used to manage foreign exchange risk are more complex than ever before. The objective of our paper is to provide the techniques and insights needed to pinpoint opportunities and control risks. We will present the most modern practical methods for managing the currency risk: option strategies (spread, strangle, straddle, etc). Also we will present the advantage, the disadvantage and our opinions related with the use of currency derivatives instruments (especially currency strategies options), making a comparative analysis. |
| first_indexed | 2024-12-12T13:56:02Z |
| format | Article |
| id | doaj.art-02b33166f2ef4f5a937f4f24204a3ec2 |
| institution | Directory Open Access Journal |
| issn | 1841-8678 |
| language | English |
| last_indexed | 2024-12-12T13:56:02Z |
| publishDate | 2007-06-01 |
| publisher | General Association of Economists from Romania |
| record_format | Article |
| series | Theoretical and Applied Economics |
| spelling | doaj.art-02b33166f2ef4f5a937f4f24204a3ec22022-12-22T00:22:28ZengGeneral Association of Economists from RomaniaTheoretical and Applied Economics1841-86782007-06-016(511)6(511)2732Usage of Option Contracts for Foreign Exchange Risk ManagementDaniel ArmeanuFlorentina-Olivia BaluToday in Romania, in the context of the liberalization of the capital account and under a floating exchange rate (official is a managed floating currency regime established by National Bank of Romania) the foreign exchange rate is very volatile. In consequence the financial institutions, corporations and, especially, the importers and exporters have to deal with a big exposition of currency risk related with their activities. Financial institutions and corporations today must adopt new roles in order to compete successfully in the explosively evolving foreign exchange markets. The methods, instruments and techniques used to manage foreign exchange risk are more complex than ever before. The objective of our paper is to provide the techniques and insights needed to pinpoint opportunities and control risks. We will present the most modern practical methods for managing the currency risk: option strategies (spread, strangle, straddle, etc). Also we will present the advantage, the disadvantage and our opinions related with the use of currency derivatives instruments (especially currency strategies options), making a comparative analysis.http://www.ectap.ro/articole/226.pdfforeign exchange ratemanage currency riskcurrency derivatives (futuresoptions)currency option strategies (callputspreadstraddlestrangle) |
| spellingShingle | Daniel Armeanu Florentina-Olivia Balu Usage of Option Contracts for Foreign Exchange Risk Management Theoretical and Applied Economics foreign exchange rate manage currency risk currency derivatives (futures options) currency option strategies (call put spread straddle strangle) |
| title | Usage of Option Contracts for Foreign Exchange Risk Management |
| title_full | Usage of Option Contracts for Foreign Exchange Risk Management |
| title_fullStr | Usage of Option Contracts for Foreign Exchange Risk Management |
| title_full_unstemmed | Usage of Option Contracts for Foreign Exchange Risk Management |
| title_short | Usage of Option Contracts for Foreign Exchange Risk Management |
| title_sort | usage of option contracts for foreign exchange risk management |
| topic | foreign exchange rate manage currency risk currency derivatives (futures options) currency option strategies (call put spread straddle strangle) |
| url | http://www.ectap.ro/articole/226.pdf |
| work_keys_str_mv | AT danielarmeanu usageofoptioncontractsforforeignexchangeriskmanagement AT florentinaoliviabalu usageofoptioncontractsforforeignexchangeriskmanagement |