| dc.description.abstract | Taiwan is an export-oriented economy and thus firms have foreign exchange rate exposures. By a case study, this dissertation examines the exchange risks, exchange risk management tools and costs of this specific multinational firm in Taiwan.
This study has four findings. First, if the local currency (in this case, NTD) appreciates at the expiration date of the forward contract, the trading cost of the forward contract is the lowest one. However, if the local currency depreciates at the expiration of the forward contract, no hedge has the lowest trading cost. Second, in this case study, the translation exposure cannot be hedged by the forward contract or balance-sheet method. Rather, the risk is mitigated by the capital management. Third, hedging economic exposure usually involves in the rearrangement of tangible assets (for example, re-locate the manufacturing cite). Such method is inflexible and thus is less likely to be immediately and widely used by firms. To mitigate the economic exposure, the case company reduces the difference between sales revenue and sales costs in U.S. dollars, improves the production process, and increases USD-nominated loans. Finally, the case company adopts several strategies to mitigate the exchange rate exposure, and simulation results show that hedging through exercising forward contract or using call/put options can effectively mitigate the foreign exchange risks. | en_US |