Hedging currency futures basis risk : a SADC uniform currency perspective

Jordaan, Felipe Yvann (2012-03)

Thesis (MComm)--Stellenbosch University, 2012.

Thesis

ENGLISH ABSTRACT: The implementation or adaption of a common currency by a group of countries has managerial as well as risk management implications for these emerging market multinational corporations (EMNC’S). This study sets out to examine these business management implications and the computation of a fictitious uniform currency for the SADC region, “SADC dollar” to derive its optimality should the SADC dollar replace the ZAR. This optimality was determined by comparing the basis risk of currency futures hedge positions using both the USD/ZAR on a ZAR currency index and USD/SADC dollar on a SADC currency index as the respective underlings. Findings indicated that the basis risk and currency risk declined over a time-series analysis which implied better business management decisions, increased profit margins, larger firm value and more effective hedged positions for the companies in South Africa that may adopt this new currency.

AFRIKAANSE OPSOMMING: Die implementering of aanvaarding van ‘n gemene wisselkoers deur ‘n groep SADC-lande het besigheidsbestuurs- asook risikobestuursimplikasies vir SADC multinasionale maatskappye. Hierdie studie beoog om die implikasies vir bestuur te ondersoek en te bepaal hoe die skep van ‘n fiktiewe eenvormige wisselkoers vir die SADC-streek gebruik kan word, dit is, sou die “SADC dollar” die ZAR vervang. Hierdie optimaliteit is bereken deur die basisrisiko van verskeie valutatermynkontrakte vergelyk. Die instrument onderliggend aan die verskillende valutatermynkontrakte was die VSA dollar/rand wisselkoers wat op ‘n Suid-Afrikaanse rand (ZAR) valutaindeks gemodelleer is en die VSA dollar/SADC dollar wat op ‘n SADC valutaindeks gemodelleer was. Die resultate van die navorsing op die gekose tydreeks dui daarop dat die basisrisiko sowel as die valutarisiko moontlik sal afneem. Die implikasie hiervan is moonlik beter besigheidsbestuurs-besluite, toename in winsmarges, toenames in maatskapywaardes en meer effektiewe skans posisies vir maatskappye in Suid–Afrika wat hierdie eenvormige wisselkoers sou implementeer.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/19903
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