Exchange rate risk

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Under rate risk is understood in the financial industry , the chances of winning and losing hazards resulting from price or fluctuations in financial products or merchandise ( commodities can result) within a certain time period. The price risk is especially in banking , a market risk and consists of the risk that price changes (price changes) of securities , foreign exchange , varieties or precious metals occur and losses can result.


A prerequisite for a price risk is always that in the period between the purchase and sale of a financial product or commodities (such as raw materials ) their price or price may fluctuate. Therefore, there is a price risk only if prices or prices do not remain constant but are subject to fluctuations in supply and demand within a certain period of time. The price risk depends on the period between buying and selling and the volatility of the market. So it increases the longer the period between buying and selling, the greater the price fluctuations or the narrower a market is. From a planning point of view, the exchange rate risk can also be defined as the deviation of the realized rate from the calculated rate on the planning horizon ; from a pagatorial point of view, rate or price changes lead to gains or losses. When taking both price risks not to operation purpose of a company is one, they are the extraordinary income in gains ( § 275 para. 2 no. 15 HGB ) or the extraordinary expense in losses (§ 275 para. 2 no. 16 HGB) attributable.

Price risk in arbitrage and speculation

In arbitrage , the transactions are related to a specific point in time , so that buying and selling prices are safe. In this way, price risks are excluded in arbitrage. Since speculation, on the other hand, is regularly time-related , price risks can arise. They arise from the uncertainty of the further course of the course in the future.

On speculative markets, commodities or financial products are also acquired by speculators for the purpose of speculation, so that there is a higher price and exchange rate risk for market participants . But even the risk of fluctuations in less speculative markets is sufficient to help market participants to become more aware of the price risk. In a survey, almost all of the German companies surveyed (96%) stated that they were affected by fluctuations in exchange rates. While the majority of 45% of the large companies surveyed rated the importance of the exchange rate risk as significant, 50% of medium-sized companies described this risk as medium. In total, 95.8% of companies hedge against exchange rate risks.

Price risks for individual financial products and commodities

Whether and to what extent exchange rate risks can occur depends on the respective financial product. First the financial products denominated in euros are listed.

Financial product Exchange rate / price risk yes / no Remarks
Sight deposits , time deposits , savings deposits No no courses or prices available
Bonds no
when to maturity are held
if they are sold during the term
Shares , convertible bonds , participation certificates , option bonds , investment funds , money market funds , pension funds Yes there is a price risk, total loss possible
Foreign exchange , sorts , precious metals Yes there is a (exchange) exchange rate risk, total loss possible
All forms of investment in foreign currency Yes Exchange rate risk results at least from exchange rate risk , total loss possible
Receivables from exports in foreign currency
Liabilities from imports in foreign currency
There is a (exchange) exchange rate risk and a country risk , total loss possible,
there is a (exchange) exchange rate risk

Exchange rate risks with non-banks

The price risks from financial products owned by non-banks are shown in the table above. If these price risks result from investment advice , the extent of the risks can be assigned to a specific risk class to which the clients advised belong by rating the credit institution. If foreign currencies are involved, the exchange rate risk belongs to the so-called value risks in addition to the parity change risk. The exchange rate risk (currency risk) is the possibility of a loss as a result of changes in the exchange rate or parity .

The exchange rate risk outside of the financial products also affects exporters such as importers whose receivables or liabilities are denominated in a foreign currency. The exporter bears the exchange rate risk if he agrees to accept payment in a foreign currency at a later point in time and an importer bears the exchange risk if he agrees to pay in foreign currency at a later point in time. In addition, the exporter faces a country risk with receivables in foreign currency , against which he can protect himself with an export credit insurance . In the balance are provisions for exchange rate risks in foreign currency loans to make. The RFH had already decided in February 1925 that the excess of receivables and liabilities should be valued in a foreign currency. According to the imparity principle of Section 252, Paragraph 1, No. 4, first half-sentence of the German Commercial Code (HGB), (latent) exchange rate losses must be shown when they are expected, while latent (unrealized) exchange rate gains may not be shown.

Exchange rate risks in banking

Entering into exchange rate risks is part of the business purpose of banks . Exchange rate risks are among the financial risks and are borne by banks exclusively in proprietary trading . They can only arise when there is an open position due to excess assets or liabilities in a financial product. According to MaRisk, the exchange rate risk is specifically one of the market (price) risks:

Market (price) risks are the risk of loss from fluctuations in market prices. This includes share price, currency, interest rate and commodity risks.

In terms of supervisory law, a distinction is made between the general and the particular price risk for interest-rate and share price-related positions. Located in the capital market theory as a systematic risk -known general market risk ( English general market risk ) is the change in value of a financial instrument due to market-driven rate changes (such as interest rates , economic ). A special rate risk ( English specific risk ; unsystematic risk ), however, has rating-related rate changes ( issuer risk ), or product-specific risks to the cause.

  • In the case of a share, the general market risk lies in general changes in the stock market or the industry, while the particular market risk is based on circumstances that can be ascribed to the company issuing the share.
  • In the case of interest rates, the general market risk lies in general changes in the interest rate structure, the particular risk is based on changes in the debtor's creditworthiness (default risk).

The equity backing for positions with price risks is determined in the banking book in the same way as in the trading book .

Regulation of share price risk

Only previously netted positions in the same securities are included in the credit amount for trading book positions . The net position is the balance of opposing positions.

Equity net position :

  • existing claims and obligations in cash, futures and option transactions
  • Derivative transactions (largely corresponding and opposing), insofar as they can be allocated to the net interest position.

Correlation procedure

General price risk

For the general price risk , the assumption is made that all stocks in the national market are equally affected by general market movements. It is balanced accordingly. The remaining balance is then to be underlaid with 8% (best case method). Problem: Backing of risk-free positions and no backing of risky positions can occur depending on the long / short position taken.

Special price risk

Special price risk must be backed with 4% (regardless of whether short or long). In the case of highly differentiated portfolios , a discount of 50% is granted on the credit rate. This takes into account the fact that the systematic risk decreases in highly diversified portfolios.

Regulation of bond price risk

Stop-loss orders are an option to limit particular price risks .

Companies that are authorized to trade in stocks, bonds, etc. by the BAFin (Federal Financial Supervisory Authority) must inform their (non-professional) customers of the possible exchange rate risk, as otherwise they can be held liable for loss-making deals - according to the judgment of the BGH .

Course hedging

Anyone can hedge against exchange rate risks. This hedging of price risks is called hedging . Price risks can be avoided within the framework of hedging through hedging transactions ( forward transactions , futures , options ), closing out or covering open positions (with banks in the banking or trading book). As part of risk management , mostly only those price risks are hedged for which a negative price development is expected; otherwise the risk of loss is accepted as the chance of a price gain is assessed as being higher. An essential means of handling price risk is spreading risk through diversification .

See also

Individual evidence

  1. Hartmut Wiethoff, Risk Management on Speculative Markets , 1991, p. 159 ff.
  2. the price risk is higher, the lower the interest rate and the longer the term
  3. Fernando De Filippis, Currency Risk Management in Small and Medium-Sized Enterprises , 2010, p. 112
  4. Rudolf Sachs, Guide to Foreign Trade , 1985, p. 103
  5. ^ RFH, judgment of February 5, 1925, Az .: VI A 31
  6. BaFin, Circular 10/2012 (BA), Explanations MaRisk of December 14, 2012 , reference number BA 54-FR 2210-2012 / 0002, BTR 2.1, No. 1
  7. Ralf Prinzler, Value-at-risk-Estimation with Gaussian mixed distributions and artificial neural networks , 2001, p. 10
  8. Jonathan Hofmann / Sandra Schmolz, Controlling and Basel III in corporate practice , 2014, p. 89
  9. Same means that the issuer, currency, national market, repayment profile and voting rights are identical.
  10. ^ BGH, judgment of September 28, 2004, Az .: XI ZR 259/03
  11. Martin Glaum / Gerhard Förschke, Financial Risk Management in German Industrial and Commercial Enterprises, in: Der Betrieb, Volume 53, Issue 12, 2000, pp. 582 f.