Foreign exchange risk management: issues, analysis and empirical applications

Abstract

This paper aims to give an insight into the topic of Foreign Exchange Risk and the management of this risk. In an increasingly globalized economy, currency rates are essential for international trade and finances. And while other aspects of financial activity are wellknown, foreign exchange risk management is still developing. Especially in a country as Spain, where financial markets are still being built in many aspects. The objective of this paper is to give an overview of the antecedents and foundations of this exposure, of the arguments in favor and against hedging the exposure, of the different types of exposures and of the instruments and strategies available. Finally, the paper aims to give an insight into the situation of small and medium companies in Navarre regarding foreign exchange risk management