Exposure analysis of RMB exchange rate in business

Junzo Watada; Song Wen

doi:10.1109/ICICIC.2008.268

Exposure analysis of RMB exchange rate in business

Junzo Watada^*, Song Wen

^*Corresponding author for this work

Research output: Chapter in Book/Report/Conference proceeding › Conference contribution

Abstract

The objective of the paper is to estimate the impact of asymmetric RMB exchange rate volatility on investment. Since the new policy of RMB exchange rate was executed in 2005, the exchange rate of RMB is more fluctuant than before and difficult to forecast. The methods of real options and binomial decision trees are introduced in the paper to test the nonlinearity of RMB/USD exchange rate. Monthly data of exchange rate between RMB and US dollar during past 6 years are analyzed as an example. Finally, a real options approach is used to evaluate the exchange rate influence under the hypothetical situation that most of the firms can change the currency composition after a certain adjustment period or with the adjustment costs. The result indicates that options theory can provide useful financial hedges for the economic exposure management by bringing out the adjustment costs.

Original language	English
Title of host publication	3rd International Conference on Innovative Computing Information and Control, ICICIC'08
DOIs	https://doi.org/10.1109/ICICIC.2008.268
Publication status	Published - 2008
Event	3rd International Conference on Innovative Computing Information and Control, ICICIC'08 - Dalian, Liaoning Duration: 2008 Jun 18 → 2008 Jun 20

Other

Other	3rd International Conference on Innovative Computing Information and Control, ICICIC'08
City	Dalian, Liaoning
Period	08/6/18 → 08/6/20

ASJC Scopus subject areas

Computer Science Applications
Software
Control and Systems Engineering

Access to Document

10.1109/ICICIC.2008.268

Cite this

@inproceedings{2d3c0af968cb4b5ab213f0141b847417,

title = "Exposure analysis of RMB exchange rate in business",

abstract = "The objective of the paper is to estimate the impact of asymmetric RMB exchange rate volatility on investment. Since the new policy of RMB exchange rate was executed in 2005, the exchange rate of RMB is more fluctuant than before and difficult to forecast. The methods of real options and binomial decision trees are introduced in the paper to test the nonlinearity of RMB/USD exchange rate. Monthly data of exchange rate between RMB and US dollar during past 6 years are analyzed as an example. Finally, a real options approach is used to evaluate the exchange rate influence under the hypothetical situation that most of the firms can change the currency composition after a certain adjustment period or with the adjustment costs. The result indicates that options theory can provide useful financial hedges for the economic exposure management by bringing out the adjustment costs.",

author = "Junzo Watada and Song Wen",

year = "2008",

doi = "10.1109/ICICIC.2008.268",

language = "English",

isbn = "9780769531618",

booktitle = "3rd International Conference on Innovative Computing Information and Control, ICICIC'08",

note = "3rd International Conference on Innovative Computing Information and Control, ICICIC'08 ; Conference date: 18-06-2008 Through 20-06-2008",

}

TY - GEN

T1 - Exposure analysis of RMB exchange rate in business

AU - Watada, Junzo

AU - Wen, Song

PY - 2008

Y1 - 2008

N2 - The objective of the paper is to estimate the impact of asymmetric RMB exchange rate volatility on investment. Since the new policy of RMB exchange rate was executed in 2005, the exchange rate of RMB is more fluctuant than before and difficult to forecast. The methods of real options and binomial decision trees are introduced in the paper to test the nonlinearity of RMB/USD exchange rate. Monthly data of exchange rate between RMB and US dollar during past 6 years are analyzed as an example. Finally, a real options approach is used to evaluate the exchange rate influence under the hypothetical situation that most of the firms can change the currency composition after a certain adjustment period or with the adjustment costs. The result indicates that options theory can provide useful financial hedges for the economic exposure management by bringing out the adjustment costs.

AB - The objective of the paper is to estimate the impact of asymmetric RMB exchange rate volatility on investment. Since the new policy of RMB exchange rate was executed in 2005, the exchange rate of RMB is more fluctuant than before and difficult to forecast. The methods of real options and binomial decision trees are introduced in the paper to test the nonlinearity of RMB/USD exchange rate. Monthly data of exchange rate between RMB and US dollar during past 6 years are analyzed as an example. Finally, a real options approach is used to evaluate the exchange rate influence under the hypothetical situation that most of the firms can change the currency composition after a certain adjustment period or with the adjustment costs. The result indicates that options theory can provide useful financial hedges for the economic exposure management by bringing out the adjustment costs.

UR - http://www.scopus.com/inward/record.url?scp=52449122025&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=52449122025&partnerID=8YFLogxK

U2 - 10.1109/ICICIC.2008.268

DO - 10.1109/ICICIC.2008.268

M3 - Conference contribution

AN - SCOPUS:52449122025

SN - 9780769531618

BT - 3rd International Conference on Innovative Computing Information and Control, ICICIC'08

T2 - 3rd International Conference on Innovative Computing Information and Control, ICICIC'08

Y2 - 18 June 2008 through 20 June 2008

ER -

Exposure analysis of RMB exchange rate in business

Abstract

Other

ASJC Scopus subject areas

Access to Document

Other files and links

Fingerprint

Cite this