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Effective FX-hedge policy using financial market in Korea

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Frame of Image utflows of foreign capital increased greatly and this resulted in a higher volatility in exchange rates. In addition, many countries introduced quantitative easing in order to overcome the eurozone financial crisis and the global recession. The value of their national currency declined as a consequence and this triggered concerns for a potential global currency war.
exchange risks that ebb and flow with the conditions of the global economy.
Foreign Exchange Risk Management Status and Problems In this paper, authors analyzed the current
state of Korean companies’ foreign exchange hedging activities to find out whether such hedging is required, by calculating currency exposure of each company. They also examined other cases from around the world to find out the most efficient measure.
Korea has constantly been exposed to the
risk of foreign exchange market as a small open economy with internationally inconvertible domestic currency. Korea always needs to be prepared for foreign
Effective FX-hedge policy using financial market
2
In general, Korean firms do appear to be vulnerable to foreign exchange volatility. This is because of low awareness among companies regarding foreign exchange risk management and the fact that there are not enough derivatives that allow firms to hedge foreign exchange risks via financial markets. Also, there is the companies’ lack of understanding about foreign exchange risk management methods. The fear of derivatives as a result of the KIKO
affair keep


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Title Effective FX-hedge policy using financial market in Korea
Similar Titles
Material Type Reports
Author(English)

Yoon, Deokryong; Kang, Sammo; Park, Eunseon

Publisher

Korea Institute for International Economic Policy

Date 2013-09
Series Title; No World Economy Update / 3-41
Pages 5
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Economic Administration
Economy < Economic System
Holding Korea Institute for International Economic Policy