Financial risk hedging possibilities in BorsodChem MCHZ, s. r. o.

Abstract

Thesis is focused on risk hedging in chemical company. Goal of this thesis is to describe, analyze, apply and verify chosen hedging strategies which can be used for financial hedging in BorsodChem MCHZ, s.r.o. Thesis is focused on currency risk hedging in Euro and US dollar trading. Whole thesis is divided into three parts where the first one is dealing purely with BorsodChem company which was chosen for this work. There is introduced the company in this chapter, its history, business relations and potential financial risk which can influence course of the company. The methodical part of the thesis pursues with financial risks questions, possibilities of their hedging and financial derivatives and their pricing models. Practical part began with volatility estimation according to the EWMA model and then there was forecasted exchange rate of CZK/EUR and CZK/USD for 2010. After that there was chosen 8 hedging strategies for EUR and 5 for US dollar which were applied and compared. As the most suitable strategy were proposed forward contract with 1 month maturity time and two option strategies Risk Reversal and Risk Reversal with different quantities. Due to high correlation coeficient, thus similar exchange rate evolution of CZK/EUR and CZK/USD, were the recommended strategies for US dollar the same.