Báo cáo bài tập lớn môn học bằng tiếng Anh : INTERNATIONAL PAYMENT IN TRAVEL AND TOURISM

Exchange rate riskWhat is the FOREX?. • Accessibility to all individuals and corporative traders  Trader’s purpose: get profit as the result of foreign currency purchase and sale   Ex

INTERNATIONAL PAYMENT

IN TRAVEL AND TOURISM

Group 4

Nguyễn Thị Huyền Trang

Hoàng Thị Minh Ngọc

Lê Thị Loan

Nguyễn Thị Thùy Linh

Đào Thị Thanh Xuân

Discussion question:

Analysis the risk by the foreign

exchange on FOREX

1 Exchange rate risk

2 Interest rate risk

3 Credit risk

4 Dictatorship risk/Country risk

4 Dictatorship risk/Country risk

Contents

1 Exchange rate risk

What is the FOREX?

 International currency market

• A special kind of the world financial market

• Different from other sectors of the world financial system.

• Heightened sensibility to a large and continuously changing number of factors.

• Accessibility to all individuals and corporative traders

 Trader’s purpose: get profit as the result of foreign currency purchase and sale

  Exchange rate change under the action of demand and supply alteration

1 Exchange rate risk

What is it?

How it works?

Position limit

Loss limit

The risk involved based on the effect

if the continuous and usually

fluctuating shift in the worldwide

market supply and demand balance

on an outstanding foreign exchange position

1 Exchange rate risk

What is it?

How it works

Position limit

Loss limit

•Quite substantial

•Based on the market’s perception

of which way the currencies will move

at anytime &

anywhere in the world

1 Exchange rate risk

What is it?

How it works?

Position limits

Assessing

Establishing the maximum amount

of any currency at which a trader is allowed to carry,

at any single time

1 Exchange rate risk

What is it?

How it works?

Position limit

Loss limit

The loss limit is

a measure designed to avoid

unsustainable losses made by traders by

means of setting stop loss levels

It is imperative that you have stop loss orders

in place

 Exchange rate risk is the risk associated with changes in the quoted rate of the currency market

 In fact, this change is also what we expect when investing in the Forex market

 This is the biggest risk of all types of risks, but also bring huge profits for investors.

 Any tools to limit this risk also limited potential profits.

 

1 Exchange rate risk

 Occurs as a result of changes in exchanger rate.

Refers to the profit and loss generated by

fluctuations in the forward spreads , along with

forward amount mismatches and maturity gaps

among transactions in the foreign exchange book.

To minimize interest rate risk, one set limits on the total size of mismatches A common approach is to separate the mismatches, based on their maturity dates into up to six months and past six months.

2 Interest rate risk

The central bank's interest rate changes

periodically to manage the economy and as such, the interest rate differential is also

changing rapidly

This change is rare and a large interest rate cuts never occur rapidly but slowly, step by step That is why traders should keep an eye on the interest rate change of currency

if they want to pursue a long-term investment strategy

2 Interest rate risk

3.Credit risk

What is it?

Replacement risk

Settlement risk

Possibility that

an outstanding currency

position may not be repaid

as agreed, due

to a voluntary

or involuntary action by a

counter party

3 Credit risk

What is it?

Replacement risk

Settlement risk

Occurs when counter-parties

of a failed bank

or Forex broker find they are at risk of not

receiving their funds from the failed bank

3.Credit risk

What is it?

Replacement risk

Settlement risk

-Occurs because of the difference of time

zones on different continents

-Currencies may be traded at different prices at different times during the trading day

Australian and New Zealand Dollars are credited first, then the Japanese Yen, followed by the European currencies and ending with the

US Dollar

4 Dictatorship risk/country risk

Dictatorship (sovereign) risk refers

to a government's interference in the Forex marketplace

Although theoretically present in

all foreign exchange instruments - currency futures are, for all

practical purposes, exempt from

country risk, for the reason that

the major currency futures markets are located in the US.

4 Dictatorship risk/country risk

account for all types of risk and take the necessary

measures to account for

possible administrative

restrictions that may affect their market positions.