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Abstract

The increased volatility of the financial markets, has given rise to increased financial price risks faced by companies. Companies are now exposed to risks caused by unexpected movements in exchange rates and interest rates. With the growing global presence of the telecommunications industry, the companies in these industries are exposed to a wide range of financial risks, in particular foreign exchange risks and interest rate risk. The management of these risks has become paramount for the survival of companies in today’s volatile financial markets.

1.0 . Introduction

Over recent decades, the financial markets have become more volatile due to significant changes, which have taken place in the domestic and international financial markets. In the post war period, managers of corporations worried little about foreign exchange rate and interest rates, as interest rates were fairly stable and the fixed exchange rates of the Bretton Woods era allowed companies know with great certainty the amount of home currency it expected to pay for imports. However since the 1970’s changes occurred. After the collapse of the Bretton Woods system and the move to generalized floating among the major exchange rates, it soon became clear that large movements in exchange rates were occurring far more frequently than many flexible rate advocates had expected, with the rates fluctuating widely in unanticipated directions and magnitudes, which consequently affected interest rate movements as the monetary authorities tried to influence exchange rates by movements in interest rates, (see Figures 1 and 2).本英语毕业论文由英语论文网 www.51lunwen.org整理提供

The business world today has little doubt about the existence of currency risks and interest rate risks. With the persistent volatility of these factors, businesses, whether multinational corporations or domestic firms who are exposed to the impact of exchange rate changes through international competition, can be largely affected by these unanticipated movements and can cause very large gains or losses if the risks remain unmanaged. Exchange rates movements generate business risks of many types, often complex and sometimes hidden, which alter the value of existing foreign assets and liabilities, while movements in interest rates alter the value of a firm as it can indirectly affect the competitive position of the company which impacts the size of their future cash flows, also it alters the firms portfolio as interest rate movements influence the investment behaviour of firms through its effect on the cost of capital.
Multinational corporations and domestic firms alike, who face these risks, must ensure that they manage these risks fully as the potential result of not managing currency risks and interest rate risks properly can be total failure of the business. With the sustained changes in the financial and competitive environment of most corporations, increased internalisation of economic activity and the unprecedented era of world wide currency and interest rate volatility, new innovative foreign exchange risk and interest rate risk hedging techniques have grown at a rapid speed, and are designed to assist management in controlling risk and minimising the effect of uncertain ca本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。