Foreign Exchange Risk Management

In the early 1990s, the forex market in India was in the initial stages of development and suffered from several shortcomings. The spot as well as forward markets lacked depth and liquidity. The market was skewed with a handful of public sector banks accounting for bulk of merchant business and foreign banks handling most of inter-bank business. In line with the liberalisation measures undertaken in other areas, various reform measures have been introduced in the foreign exchange market to make it liquid, vibrant, open and market-determined. With the introduction of market-determined exchange rate, companies have been exposed to risks of fluctuating rates which divert their attention from day-to-day corporate affairs. Management of risk associated with exchange rate is a new challenge for company managers. What is this risk? What are the perceptions of corporate managers about it? How to cope with it? These are the issues and solutions discussed in this book.