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Finance & Accounting
Pages 5 (1255 words)
Introduction Banks and financial institutions have played a significant role in integrating the different economics of the world. A brief analysis of the global economic scenario can highlight the fact that the banking industry has always been that sector which has either strengthen or uplifted the economic outlook of a particular region, or has caused turmoil .
Exchange rate risk is the risk to earnings or capital arising from movement of exchange rates. The need to manage the exchange rate risk is very crucial for any bank and it has generally been observed that the exchange rate risk management form the integral part of the risk management policies of all major global banks. [Gorton, G. & Rosen, R., 1995] When a multinational operates in such a number of markets, internationally, it is exposed to a great deal of risks, and in order to operate as per its predetermined objectives, the management of these risks is of prime importance.[ Moffet, M. & Karlsen, J., 1994] These risks pose a direct threat to the assets, liabilities and operative income of the firm which commonly results from the variations in interest rates, exchange rates and inflation rates. Macroeconomic environment of different countries plays n important role in setting up these risks which affect different countries according to their structure. ...
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