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  • Using Derivatives for Hedging of the Currency Risks of Enterprises that Have a Currency Component in Revenue / Cost

Using Derivatives for Hedging of the Currency Risks of Enterprises that Have a Currency Component in Revenue / Cost

Student: Ziganshina Iuliia

Supervisor: Elena V. Rozhentsova

Faculty: Faculty of Economics, Management, and Business Informatics

Educational Programme: Economics (Bachelor)

Final Grade: 9

Year of Graduation: 2018

This paper examines the question of what factors influence the decision of corporate clients of Sberbank to use derivative instruments to hedge their exchange rate risks. In academic literature, the study of this issue does not occur. In this study, this question is solved using a regression analysis (logit model) testing a representative sample of clients of Sberbank from medium, large and largest business segments, who whenever used derivatives provided by Sberbank. This study has some limitations: the first is related to the coverage of the data - a sample was tested only for one bank - Sberbank, the second is due to the inaccessibility of some data - information such as the industry in which companies work, company names and their financial performance was inaccessible due to confidentiality. All the hypotheses outlined in this study were confirmed.It turned out that the volatility of the underlying asset, the experience of the client manager and the position of the decision maker have a positive impact on the decision to purchase a derivative, while all other factors considered to have a negative impact.The results obtained can be applied in practice. In accordance with the recommendations presented in this study, Sberbank will be able to adjust the policy of sales of derivatives, and more successfully attract customers to use derivative instruments for hedging currency risks. In further studies, a representative sample can be expanded by statistics from other branches of Sberbank and by statistics from rival banks. That expansion can help improve the quality of present research.

Full text (added May 22, 2018)

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