Abstract
Multinational enterprises (MNEs) operating across different currencies are exposed to exchange rate risk. They may utilize a variety of tools to mitigate that risk. While there are different types of exchange rate risk, this study focuses specifically on the ongoing exposure of cash flow transactions denominated in the currencies of seven different developed countries. Since other types of risk (i.e., economic and translation) are evaluated based on yearly results, they are not considered in this study. The modified value-at-risk (MVaR) model is employed to estimate the maximum one-period losses during the eighteen months before the onset of the COVID-19 pandemic and, in addition, the maximum one-period losses during the eighteen months following the onset of the COVID-19 pandemic. The predicted losses using MVaR are then compared with the actual ex-post results. Our objective is to analyze the extent of the cash flow transaction exposure and provide practical insights to MNEs as they decide whether or not they should hedge this risk. This study is noteworthy because it compares the pre- and post-COVID-19 periods.
Keywords
foreign exchange rate, currency risk, transaction exposure, maximum loss
Chinese Abstract
COVID-19 及其对跨国企业的影响：修正风险价值方法
由于跨国企业(MNE)使用不同货币运营而面临汇率风险，他们会利用各种工具来减轻此类风险。虽然汇率风险有不同类型，但是本研究特别关注以七个发达国家不同货币计价的现金交易所带来的持续风险。由于其他类型的风险（如经济和转换风险）是根据年度损益来进行评估，因此它们不在本研究的考虑范围内。本研究采用修改后的风险价值(MVaR) 模型来估计 COVID-19疫情爆发前18个月内最大一期的损失，以及疫情爆后18个月内最大一期的损失。然后，MVaR模型所预测的损失会与实际的事后结果进行比较。研究的目标是分析现金交易风险的程度，并为跨国企业应否对冲这种风险提供实用的观点。这项研究值得注意的是它为COVID-19疫情前后的期间作出了对比。
关键词: 外汇汇率、货币风险、交易风险、最大损失
ORCID Identifiers
Kashi Khazeh: https://orcid.org/0009-0000-1832-2110
Leonard Arvi: https://orcid.org/0000-0001-5752-7055
Robert Winder: https://orcid.org/0000-0002-1131-2371
DOI
10.5038/2640-6489.9.1.1256
Recommended Citation
Khazeh, K., Arvi, L., & Winder, R. C. (2024). COVID-19 and its impact on multinational enterprises: A modified value at risk approach. Journal of Global Business Insights, 9(1), 14-28. https://www.doi.org/10.5038/2640-6489.9.1.1256
Creative Commons License
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