Currency Risk Model for Financial Organizations and Banks

Description
Currency risk, commonly referred to as exchange-rate risk, arises from the change in price of one currency in relation to another. Investors or companies that have assets or business operations across national borders are exposed to currency risk that may create unpredictable profits and losses. Many institutional investors, such as hedge funds and mutual funds, and multinational corporations use forex, futures, options contracts, or other derivatives to hedge the risk.

Managing currency risk began to capture attention in the 1990s in response to the 1994 Latin American crisis when many countries in that region held foreign debt that exceeded their earning power and ability to repay. The 1997 Asian currency crisis, which started with the financial collapse of the Thai baht, kept the focus on exchange-rate risk in the years that followed.

The Information about Currency Risk Model ----

Currency Risk Model for the Commercial Banks and Financial Institutions.
The role of currency risk model :
Shows each currency pair position and stability within balance sheet of financial organization
The liquidity ratios and liquidity position of each currency pairs
Working capital and GAP of each currency pairs of the balance sheet
Mainly used by risk management analyst
Helps for Assets Liability Managers