外汇风险概述.ppt

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1、 Economic/Operating Exposure OutlineLufthansa caseOperating ExposureExampleMeasuring operating exposureManaging operating exposurefinancial hedgesbusiness strategiesLufthansaJan.85:purchased 20 Boeing 737s for$500 mln,payable Jan.1986.What to do with the DM/$exchange risk?Remain uncovered?Hedge 100%

2、forward?Hedge some forward?Put options?Money market hedge/prepay?Exhibit 1(Lufthansa)Lufthansas Net Cost by Hedging AlternativeLufthansaHerr Rutnau felt the dollar was overvalued,and was likely to depreciate,reducing DM cost of aircraft.But he wasnt sure.It could appreciate(had done so for 5 years).

3、Sold 50%forward.Exhibit 2(Lufthansa)What Herr Ruhnau Could See:The RiseLufthansaHerr Rutnau felt the dollar was overvalued,and was likely to depreciate,reducing DM cost of aircraft.But he wasnt sure.It could appreciate(had done so for 5 years).Sold 50%forward.Outcome:Dollar did depreciate:down 28%!R

4、utnau heavily criticized for selling forward.Exhibit 3(Lufthansa)What Herr Ruhnau Couldnt See:The FallExhibit 1(Lufthansa)Lufthansas Net Cost by Hedging AlternativeAccusations against RuhnauChose wrong time to buy Boeing.Dollar at 1980s high in Jan.85.Hedging 50%when he expected the dollar to fall.S

5、hould have left the whole exposure unhedged.Using forwards instead of options.Buying Boeing at all.Should have bought Airbus.Should Ruhnau be fired?Operating exposure(a.k.a.economic,competitive or strategic exposure)The impact of unexpected exchange rate changes upon known and unknown but expected f

6、uture cash flows of the firm,for indefinite future.Firm value=discounted expected future cash flows Operating exposure therefore measures how firm value changes with unexpected changes in exchange ratesSimple exampleU.S.firm expects 10 mln SF/year from exports to Switzerland,indefinitely.Long-term e

7、xchange rate forecast =current spot exchange rateCurrent rate:2 SF/$(.50$/SF)Required rate of return:10%/yearWhat if the SF depreciates?E$CF$5 mln$5 mln$5 mln .V10%Perpetuity formula:V =C/rYear 1 2 3 .SFSF10 mlnSF10 mlnSF10 mln .forecast:.50$/SF.50$/SF.50$/SF .So V =$5 mln/.10 =$50 mlnE$CF$5 mln$5 m

8、ln$5 mln .10%What if SF depreciates 2%,to.49$/DM?Year 1 2 3 .SFSF10 mlnSF10 mlnSF10 mln .forecast:.50$/SF.50$/SF.50$/SF .$50 mlnE$CF V10%New exchange rate implies new X-rate forecastsYear 1 2 3 .SFSF10 mlnSF10 mlnSF10 mln .forecast:.49$/SF.49$/SF.49$/SF .E$CF$4.9 mln$4.9 mln$4.9 mln .V10%and new pro

9、jected dollar cash flowsYear 1 2 3 .SFSF10 mlnSF10 mlnSF10 mln .forecast:.49$/SF.49$/SF.49$/SF .E$CF$4.9 mln$4.9 mln$4.9 mln .$49 mln10%and reduces the value of the firm by$1 mln.Year 1 2 3 .SFSF10 mlnSF10 mlnSF10 mln .forecast:.49$/SF.49$/SF.49$/SF .Year 1 2 3 .SFSF10 mlnSF10 mlnSF10 mln .Operating

10、 exposure:$1 mln change in firm value for every 2%change in the current$/SF rate Measuring operating exposureRequires a longer-term perspective:viewing the firm as an ongoing concern with price and cost competitiveness affected by exchange rate changesRequires an overall assessment of the industry:N

11、ationality of competitors&suppliersfirms degree of market powerExample:VolvoStructure:Imports supplies from Germanyproduces in SwedenSells in U.S.Major competition:German cars(BMW,Mercedes,Audi)Most important risksSwedish krona vs.DM(not especially vs.$)Swedish interest ratesGerman producer pricesMe

12、asuring operating exposureTypes of firms:Price-taking firmsPrice-setting firms with market powerPrice-taking firms 1.Analyze impact of unexpected,persistentexchange rate changes upon local-currencyforeign market prices,for indefinite futureWhos the competition?2.Analyze impact on home-currency cash

13、flows 3.Decide what to do about the exchange rate-related operating exposure.Simple example,revisitedU.S.firm expects 10 mln SF/year from exports to Switzerland,indefinitely.Assumptions:Competing with Swiss firms.SF price unaffected by$/SF fluctuationsConsequently,$revenues heavily affected by$/SF c

14、hanges:10%SF depreciation lowers discounted expected revenues 10%.SF appreciation has the opposite effect.Example#2:U.S.chemical firm exporting to CanadaMajor competition:other U.S.firms.Chemical industry sets C$prices based on U.S.$costs.IF the Canadian dollar depreciates 10%:C$prices rise overall

15、by 10%.Reduction in total Canadian sales by 2%.Local currency result:C$revenues up 8%.U.S.$revenues for this firm fall 2%.Operating exposure not severe.Price-setting firms with(some)market powerSome ability to raise local-currency prices in foreign markets to offset FX depreciation.How much ability?

16、Depends on the price elasticity of demand for that firms products.Example:1985-87 dollar depreciation of 50%against DM11.522.533.5PlazaLouvreDM/DOLLAR EXCHANGE RATE,1974-97DM/$747678808284868890929496Example:1985-87 dollar depreciation of 50%against DMMercedes,BMW:Raise$prices to(partly)maintain DM

17、revenues?Leave$prices unchanged to maintain market share/sales volume?Policy:Raised$prices 30-40%Intense advertising campaign to differentiate German cars.Managing Operating ExposureFinancial management contractual hedgesStrategic managementmarketing initiativesproduction initiativesFinancial Manage

18、ment of Operating Exposure If have stable,predictable FC earnings,various contractual/financial hedges are feasible for the medium term(1-5 years)long-term forward contracts local-currency debt(matching)currency swapslong-term put optionsExamplesMerck(pharmaceuticals)R&D,production in U.S.Sales in U

19、.S.,abroadSales predictable(niche-market)Local-currency prices often regulated abroad Kodak(film)Concerned w/maintaining foreign market share(against Fuji)Pioneer Hi-BredHas foreign subsidiaries Long-term forward contractsWaterford CrystalCosts in Irish puntRevenues in U.S.dollarsSold anticipated$re

20、venues forward out 2 yearsDifficult to hedge forward beyond 5 yearsFinancial Management of Operating ExposureFinancial Management of Operating Exposure If have stable SF revenues want to finance them with stable SF debt so that only net SF revenues at risk.Year 1 2 3 .SF revenuesSF10 mlnSF10 mlnSF10

21、 mln .SF interestliabilities-SF9 mln-SF9 mln-SF9 mln .Net SF revenues SF1 mln SF1 mln SF1 mln .Example:Swiss subsidiary of U.S.firmIf well-established,can directly issue SF debtIf new,use a currency swapU.S.firm issues dollar debtU.S.firm swaps that debt for SF debt with a swap dealerCurrency swap1.

22、U.S.firm issues$debtU.S.firm$liabilitiesCurrency swap2.U.S.firm enters into a currency swapU.S.firm$liabilitiesswapdealerPays SFReceives$Currency swap$revenues cover$liabilitiesU.S.firm$liabilitiesswapdealerPays SFReceives$Currency swapNet effect:U.S.firm has effectively issued SFdebt to finance its

23、 foreign subsidiaryU.S.firm$liabilitiesswapdealerPays SFReceives$Strategic Management of Operating ExposureIn medium-to long-run,all firms have exchange rate-related operating exposure.Example:“domestic”U.S.car company(Chrysler?)Costs in U.S.dollarsSales,revenues in U.S.dollarsYen depreciation makes

24、 Japanese cars more competitive,reducing Chryslers revenues Real exchange rate movements affect the overall competitive environmentmonitoring/measuring such effects importanthedging can be difficult(and questionable)Firms respond strategically to exchange rate-related problems and opportunitiesmarke

25、ting initiativesproduction initiatives Goodyear-Mexico37%Mexico peso devaluation 12/94 Previously sold tires in MexicoBecame major exporter to U.S.,Europe,South AmericaExamplesExamplesU.S.textile industryU.S.cannot compete in labor-intensive textilesMajor investment in capital-intensive textiles nic

26、hesIndustrial fabricsSheets,towelsIncreased service componentQuick Reponse computerized inventory management and ordering program for coordinating textile mills/apparel manufacturers/retailersStrategic Management of Operating Exposure Marketing InitiativesMarket selectionProduct StrategyPricing Stra

27、tegyPromotional Strategy Production InitiativesProduct sourcingInput mixPlant locationRaising productivityMarket selection&diversificationMove into/out of various foreign markets,depending on competitiveness Example:Waterford Crystal(Irish)When$weakened in late 1980s,went increasingly after Asian,Eu

28、ropean markets.Marketing InitiativesMarketing InitiativesProduct StrategyAltering product niche depending on competitivenessNew-product introductionProduct line decisionsProduct innovationExample:Volkswagen(1970s)1960s:low-priced cars with few featuresDM appreciation in early 1970s,rising German lab

29、or costsVW revised product line towards higher-priced cars for middle-income consumersMarketing InitiativesPricing StrategyFor firms with some market power:decision betweenmarket shareprofit margins1.when setting local-currency prices following a currency appreciation/depreciation.1.Promotional Stra

30、tegy 1.Example:Early 1980s:strong$.2.European countries advertised Alpine skiing heavily in U.S.Production InitiativesChanging Input Mixforeign outsourcing of component inputs Example:Caterpillar.50%of pistons are foreign(Brazil)Shifting production among multiple international plantsWestinghouse:Pla

31、nts in Canada,Spain,Britain&Brazil.Toyota in 1994-6 Creating new plants abroad Example:Japanese,German car plants in U.S.Production InitiativesRaising productivityclosing inefficient plantsautomationnegotiating wage&benefit cutbacksalternate production processes Example:U.S.paper&pulp industries(Bra

32、zilian competition)0.00.51.01.52.02.53.01984198619881990199219941996199820002002U.S.Direct Investment AbroadForeign Direct Investment in U.S.($trillion)Production and marketing initiatives have substantially internationalized U.S.business over the last 15 years.SummaryUnexpected exchange rate fluctu

33、ations generally affect the short-term and longer-term prospects of the firm-operating exposureThere exist some financial tools for managing identifiable operating exposurecurrency swaps,.Firms typically respond strategically to exchange rate-related shifts or potential shifts in relative competitivenessMarketing initiativesProduction initiatives