PROJECT REPORT

(Submitted for the Degree of B.Com(H) In Accounting and Finance)

Under the University of Calcutta

Title of the Project

RISK MANAGEMENT IN FOREX MARKET

Submitted by-
Name of the Candidate: Yash Pareek

Registration No: 017-1111-0806-20

CU Roll No: 201017-21-0116

Name of the College: The Bhawanipur Education Society College

College UID: 0103203639

Supervised by Prof. Ujwal Kakkad

Month and Year of Submission: June 2023

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Annexure-IA

Supervisor's Certificate

This is to certify that Mr. YASH PAREEK, a student of The Bhawanipur

Education Society College of B.Com Honors in Accounting & Finance under
the University of Calcutta has worked under my supervision and guidance for
her Project Report and prepared a project report report with the title: RISK
MANAGEMENT IN FOREX MARKET

He is submitting his genuine and original work to the best of my knowledge.

Signature:

Name: Prof. Ujwal Kakkad

Designation: Lecturer

Name of the College: The Bhawanipur Education Society College

Place: Kolkata

Date:

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Annexure-IB

Student’s Declaration

I hearby declare that the project work with the title : RISK MANAGEMENT IN
FOREX MARKET was submitted by me under the supervision of Prof. Ujjwal
kakad for the partial fulfillment of the degree of B.Com. Honors in Accounting
& Finance under the University of Calcutta is my original work. It has not been
submitted earlier to any other Institution for the fulfillment of the requirement
for any course of study.

I also declare that no chapter of this manuscript in whole or in part has been
incorporated in this report from an earlier work done by others or by me.
However , extracts of any literature which has been used for this report has been
duly acknowledged providing details of such literature in the refrences.

Signature:

Name: Yash Pareek

Address:

Registration No: 017-1111-0806-20

Place: Kolkata

Date:

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 Acknowledgement

I would like to pay my special regard to the college for giving us such an
information and engaging task that has helped me gain deeper insights into the
research topic that I have chosen. I would like to express my sincere thanks to
my project supervisor Prof Ujjwal Kakad whose active interest in the project
and insights helped me formulate, redefine and implement my approach to the
project. I would also like to thank Prof. Ujjwal Kakad for her constant guidance.

I am also grateful to Prof. Meenakshi Chaturvedi, co-ordinator of the

department of the commerce, morning section, and Prof. Dilip Shah, Dean of
student affairs for providing us with all required guidance and support.

I am also thankful to all those seen and unseen hands who have been of direct or
indirect help in completing this project. Writing this project has been one of the
most significant academic challenges that i have ever faced and it would not
have been possible without the support and guidance of the people involved. It
is to them that I owe my deepest gratitude.

Table of Contents
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Chapter 1- Introduction..........................................................................................

1.1-Background of the study...................................................................................

1.2-Literature Review............................................................................................

1.3-Research Motivation.......................................................................................

1.4-Objectives of the Study....................................................................................

1.5-Research Methodology...................................................................................

1.6-Limitations of the study.................................................................................

Chapter 2- Conceptual Framework......................................................................

2.1- FOREX RISK STATEMENT.......................................................

2.2-HOW TO HEDGE FOREX MARKET RISK MANAGEMENT?...................

2.3 AVOIDING \ LOWERING RISK WHEN TRADING FOREX-…………….

Chapter 3- Analysis, and Findings....................................................................

Chapter 4- Conclusion and Recommendations...........................................

Chapter 5 – References…………………………………………………………………

Chapter 1- INTRODUCTION
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There has been a tremendous growth in international trade after the World War
II. During this period, efforts were made to facilitate free flow of goods and
services across the world. As a result, world trade grew at a faster rate. Foreign
exchange risk also known as currency risk is the likely or probable loss arising
adverse exchange rate fluctuations. It is the risk posed by adverse movements in
exchange rates. When a company has assets or liabilities denominated in a
foreign currency or contracts to receive or pay in a foreign currency, it has an
exposure to that currency. Foreign exchange risk management (FERM) helps to
hedge foreign currency assets, liabilities, income, and expenditure. FERM
involves using both internal techniques such as selection of the right currency
for invoicing, prepayment and delayed payments of payables, post payment of
receivables, judicious matching of imports and exports and external techniques
such as forwards, futures, options, and swaps that are called as currency
derivatives. The firms with greater growth opportunities and tighter financial
constraints are more inclined to use currency derivatives. German and US firms
prefer over-the-counter instruments such as swaps, options, and forwards.
Between options and forwards, the latter is used more unless the exposure is for
a longer period. Forex market provides various derivative instruments to hedge
against currency exposures such as currency forwards, options, futures, and
swaps.
The Indian pharmaceutical industry is the third major in terms of size and 13th
prime in terms of worth, as per a report by Equitymaster. India is the major
supplier of generic drugs, which represents 20 percent of global exports in terms
of volume. Currently, over 80 percent of the antiretroviral drugs used
universally to encounter AIDS are delivered by Indian medicinal firms. India
continued its top position over China in pharmaceutical exports with a year-on-
year growth of 11.44 percent to US$12.91 billion in FY 2015–2016. The Indian
pharma industry is likely to grow to US$55 billion by 2020, thereby evolving as
the sixth pharmaceutical market globally.

1.1 BACKGROUND OF THE STUDY

Foreign exchange risk management (FERM) involves using both internal and
external techniques such as forwards, futures, options, and swaps that are called

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as currency derivatives. The firms with greater growth opportunities and tighter
financial constraints are more inclined to use currency derivatives. The Forex
market provides various derivative instruments to hedge against currency
exposures such as currency forwards, options, futures, and swaps. The current
article aims at studying various FERM techniques used in the Indian
pharmaceutical industry and its impact on exchange gain/losses. For this
purpose, foreign exchange cash flows arising out of imports and exports and
exchange gain/losses of the companies during 2010–2017 of 10 sample
companies chosen from the pharma industry are used. It is observed from the
study that only two currencies—USD and EUR—hold command in the forex
market and other currencies are being used minimally. It is also noted that there
are several currency derivatives available to the business firms such as
forwards, futures, options, and swaps for hedging currency exposure. However,
among all these techniques, forward contract is considered to be an effective
hedging tool and easier to understand.

1.2 LITERATURE REVIEW

The researcher has conducted host of literature survey on the current topic of the study a
sample of which is presented further.

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Belk and Glaum (1990) found that accounting exposure was managed actively,
transaction exposure management was the centerpiece of FERM, and economic
exposure was subject to varied practices. Makar and Huffman (1997) examined
the use of currency derivatives by US multinationals facing potentially
significant economic and transaction exposure. Lacina (2000) observed that
currency risk is identified with statistical quantities, while exposure should be
defined in terms of what one has at risk. Anand and Kaushik (2008) found that
firms with a high debt-equity ratio are more likely to use foreign currency
derivatives. Sivakumar and Sarkar (2008) found that most Indian firms use
forwards and options to hedge their foreign currency exposure.

Dash and Madhava (2008) observed the impact of INR/USD exchange rate
variability on the Indian IT sector and reviewed the diverse types of strategies
implemented by IT companies to alleviate this impact. There is a need for
research to determine whether or not currency derivatives are being used by
Indian businesses firms.

1.3- RESEARCH MOTIVATION

The motivation behind conducting research on the impact of geopolitical events
on Forex market risk stems from several key factors: increased global
interconnectedness, Forex market volatility, and risk management challenges.

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Geopolitical events have a far-reaching impact on financial markets, such as the
Forex market, and their unpredictability and potential to trigger sudden market
movements require robust risk management strategies. By conducting research
on this topic, we can identify effective risk management techniques, develop
models to measure and forecast risk during geopolitical events, and provide
practical recommendations to market participants for mitigating and managing
these risks. Geopolitical events can have profound economic and financial
implications, affecting trade flows, investor confidence, interest rates, and
overall market stability. Research in this area can provide insights into the
macroeconomic consequences of geopolitical events and contribute to informed
decision-making.

Investor protection and financial resilience are also important, as research can
contribute to the development of strategies that enhance financial stability,
protect investor interests, and foster sustainable growth in the Forex market.
Research on the impact of geopolitical events on Forex market risk is motivated
by the need to better understand and manage the risks associated with these
events, providing valuable insights and tools to market participants,
policymakers, and regulators.

1.4- OBJECTIVES OF THE STUDY

The researcher has set the following objectives to fill the existing research gap:
1.
To examine whether foreign exchange exposure among the companies remains
uniform or not irrespective of size of the firm
2.

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To examine whether foreign exchange exposure, exchange inflow and outflow
wholly has an impact on exchange gain/losses
3.
To examine whether choice of currency derivatives is independent of factors
such as exchange gain/losses, exchange inflow and outflow, net exposure,
revenue, net profit and number of currencies exposed to
4.
To examine whether foreign exchange losses can be substantially minimized
through currency derivatives and multiple currency invoicing.

1.5- RESEARCH METHODOLOGY

The current study follows analytical research as it analyses the causes of foreign
exchange losses encountered in pharmaceutical industry and use of currency
derivatives to minimize the exchange losses. The current study is based on
secondary data collected from the annual reports and official websites of the

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companies chosen for the study. The data consists of foreign exchange cash
flows arising out of imports and exports and profitability of the companies from
2010–2011 to 2016–2017. To have equal representation, companies were
chosen on the basis of market capitalization ranging from large cap to small cap.
The companies chosen for the study are (a) Aurobindo Pharma Ltd, (b) Cadila
Healthcare Ltd, (c) Cipla Ltd, (d) Dishman Pharmaceutical and Chemical Pvt.
Ltd, (e) Divis Lab Ltd, (f) Dr. Reddy’s Lab Ltd, (g) Glenmark Pharmaceutical
Ltd, (h) Strides Shasun Ltd, (i) Sunpharma Ltd, and (j) Wockhardt Ltd.

Statistical Tools Used

The researcher has used various statistical techniques such as analysis of
variances (ANOVA), multiple regression-based predictive analysis model,
and F-test Descriptive statistics tools. ANOVA is used to verify whether the
exchange exposure remained uniform or different across the companies chosen
for the study. Multiple regression analysis is used to examine whether the
choice of derivative instrument is the function of exchange losses, currency
denominated, exchange exposure, etc. to examine whether the derivative usage
and multiple currency invoicing has reduced the exchange.

Hypotheses
The researcher has set the following four hypotheses in line with the objectives
designed for the current study:

Ha1: Foreign exchange exposure among the companies in pharma industry

remains uniform irrespective of size of the firm.

Ha2: Foreign exchange exposure, exchange inflow and outflow wholly has an
impact on exchange gain/losses.

Ha3: Choice of currency derivatives is independent of factors such as exchange

losses, exchange inflow, exchange outflow, net exposure, revenue, net profit,
and number of currencies exposed to.

Ha4: Foreign exchange losses can be substantially minimized through currency

derivatives and multiple currency invoicing.

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 1.6- LIMITATIONS OF THE STUDY
The current study is subjected to the following limitations:
•The current study is confined to secondary data obtained from annual reports of
respective company.

•Only the companies listed in BSE and NSE have been considered for the
current study.

•The current study pertains to the period of seven years commencing from FY
2010 to FY 2017.

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•Only external FERM techniques used by the companies are considered for the
analysis.

CHAPTER-2 CONCEPTUAL FRAMEWORK

Forex Risk Statements:-

The risk of loss in trading foreign exchange can be substantial. You should
therefore carefully consider whether such trading is suitable in light of your
financial condition. You may sustain a total loss of funds and any additional
funds that you deposit with your broker to maintain a position in the foreign

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exchange market. Actual past performance is no guarantee of future results.
There are numerous other factors related to the markets in general or to the
implementation of any specific trading program which cannot be fully
accounted for in the preparation of hypothetical performance results and all of
which can adversely affect actual trading results.

The risk of loss in trading the foreign exchange markets can be

substantial. In considering whether to trade or authorize someone else to trade
for you, you should be aware of the following:

If you purchase or sell a foreign exchange option you may sustain a

total loss of the initial margin funds and additional funds that you deposit with
your broker to establish or maintain your position. If the market moves against
your position, you could be called upon by your broker to deposit additional
margin funds, on short notice, in order to maintain your position. If you do not
provide the additional required funds within the prescribed time, your position
may be liquidated at a loss, and you would be liable for any resulting deficit in
you account.

Under certain market conditions, you may find it difficult or

impossible to liquidate a position. This can occur, for example when a
currency is deregulated or fixed trading bands are widened. Potential currencies
include, but are not limited to the Thai Baht, South Korean Won, Malaysian
Ringitt, Brazilian Real, and Hong Kong Dollar.

The placement of contingent orders by you or your trading advisor,

such as a “stop-loss” or “stop-limit” orders, will not necessarily limit your
losses to the intended amounts, since market conditions may make it impossible
to execute such orders.

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 A “spread” position may not be less risky than a simple “long” or
“short” position.

The high degree of leverage that is often obtainable in foreign exchange

trading can work against you as well as for you. The use of leverage can lead to
large losses as well as gains.

In some cases, managed accounts are subject to substantial charges for

management and advisory fees. It may be necessary for those accounts that are
subject to these charges to make substantial trading profits to avoid depletion or
exhaustion of their assets.

Currency trading is speculative and volatile Currency prices are highly

volatile. Price movements for currencies are influenced by, among other things:
changing supply-demand relationships; trade, fiscal, monetary, exchange
control programs and policies of governments; United States and foreign
political and economic events and policies; changes in national and international
interest rates and inflation; currency devaluation; and sentiment of the market
place. None of these factors can be controlled by any individual advisor and no
assurance can be given that an advisor’s advice will result in profitable trades
for a partic0pating customer or that a customer will not incur losses from such
events.

Currency trading can be highly leveraged The low margin deposits

normally required in currency trading (typically between 3%-20% of the value
of the contract purchased or sold) permits extremely high degree leverage.
Accordingly, a relatively small price movement in a contract may result in
immediate and substantial losses to the investor. Like other leveraged
investments, in certain markets, any trade may result in losses in excess of the
amount invested. Currency trading presents unique risks The interbank
market consists of a direct dealing market, in which a participant trades directly

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with a participating bank or dealer, and a brokers’ market. The brokers’ market
differs from the direct dealing market in that the banks or financial institutions
serve as intermediaries rather than principals to the transaction. In the brokers’
market, brokers may add a commission to the prices they communicate to their
customers, or they may incorporate a fee into the quotation of price.

Trading in the interbank markets differs from trading in futures or

futures options in a number of ways that may create additional risks. For
example, there are no limitations on daily price moves in most currency
markets. In addition, the principals who deal in interbank markets are not
required to continue to make markets. There have been periods during which
certain participants in interbank markets have refused to quote prices for
interbank trades or have quoted prices with unusually wide spreads between the
price at which transactions occur.

Frequency of trading; degree of leverage used It is impossible to

predict the precise frequency with which positions will be entered and
liquidated. Foreign exchange trading , due to the finite duration of contracts, the
high degree of leverage that is attainable in trading those contracts, and the
volatility of foreign exchange prices and markets, among other things, typically
involves a much higher frequency of trading and turnover of positions than may
be found in other types of investments. There is nothing in the trading
methodology which necessarily precludes a high frequency of trading for
accounts managed

HOW TO HEDGE FOREX MARKET RISK MANAGEMENT:-

The foreign currency hedging needs of banks, commercials and retail forex
traders can differ greatly. However, the following outline can be utilized by
virtually all individuals and entities that have foreign currency risk exposure.
Before developing and implementing a foreign currency hedging strategy,
individuals and entities should perform a foreign currency risk management
assessment to ensure that placing a foreign currency hedge is the appropriate
risk management tool.
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To hedge forex risk and develop and implement a foreign currency hedging
strategy, one must first identify the type(s) of risk exposure, identify the type(s)
of risk exposure that may result from one or all of the following:

(a) cash inflow and outflow gaps (different amounts of foreign currencies
received and/or paid out over a certain period of time),

(b) interest rate exposure, and

(c) foreign currency hedging and interest rate hedging cash flows. The most
important details in this text are the steps involved in managing foreign
currency risk exposure.

These steps include identifying and quantifying the possible impact that changes
in the underlying foreign currency market could have on a balance sheet,
analyzing the foreign currency market, determining appropriate risk levels,
determining how much risk exposure to hedge, determining a hedging strategy,
and determining a hedging ratio. Risk tolerance levels depend on the investor's
attitudes towards risk, how much risk exposure should be hedged, and how
much forex risk should be left exposed as an opportunity to profit. Hedging
strategies should not only be protection against foreign currency risk exposure,
but also be a cost effective solution to help manage foreign currency rate risk

. Foreign currency risk management can be managed by an in-house foreign

currency risk management group (if cost-effective), an in-house foreign
currency risk manager or an external foreign currency risk management advisor.
Proper oversight of the foreign currency risk manager or the foreign currency
risk management group is essential to successful hedging.

Each entity's reporting requirements will differ, but the types of reports that
should be produced periodically should cover the following: whether or not the
foreign currency hedge placed is working, whether or not the foreign currency
hedging strategy should be modified, whether or not the projected market
outlook is proving accurate, whether or not the projected market outlook should
be changed, any changes expected in overall foreign currency risk exposure,
and mark-to-market reporting of all foreign currency hedging vehicles.
Reviews/meetings between the risk management group and company

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management should be set periodically (at least monthly) with the possibility of
emergency meetings should there be any dramatic changes to any elements of
the foreign currency hedging strategy.

AVOIDING \ LOWERING RISK WHEN TRADING FOREX :-

Trade like a technical analyst. Understanding the fundamentals behind an

investment also requires understanding the technical analysis method. Use
simple support and resistance technical analysis, Fibonacci Retracement and
reversal days. Be disciplined and create a position and establish stop loss and
profit taking levels. Rule of thumb: In a bull market, be long or neutral - in a
bear market, be short or neutral.

With any online Forex broker, the trader can change their trade orders as many
times as they wish free of charge, either as a stop loss or as a take profit. Many
successful traders set their stop loss price beyond the rate at which they made
the trade so that the worst that can happen is that they get stopped out and make
a profit.

CHAPTER-3 ANALYSIS AND FINDINGS:-

GEOPOLITICAL EVENT IMPACT ON FOREX MARKET
RISK:-
The foreign exchange market, commonly referred to as forex, is a decentralized
global marketplace where currencies are exchanged. To succeed in this market,
you must always look for profitable opportunities and consider elements like
economic data, market sentiment and world events when making your
decisions. In this article, we’ll investigate how geopolitical events influence
currency market projections and how these forecasts could impact your trading
strategies.

What constitutes a geopolitical event?

Geopolitical events are events that have an immense effect on a nation or area’s
political situation, economic conditions and social environment. Natural

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catastrophes, political unrest, armed conflict or acts of terrorism could influence
currency prices by creating uncertainty and volatility in the forex trading
market. Therefore, forex traders must remain informed on current geopolitical
developments since these could affect currency exchange rates.

Geopolitical events can impact various currency pairings differently depending

on their nature. For instance, an event in the Middle East might influence oil
prices and, therefore, currency exchange rates of countries which are significant
exporters or importers of crude. Furthermore, any geopolitical event adversely
affecting an area’s economic prospects will influence currency exchange rates.

It is essential to be mindful of the unpredictable effects of geopolitical events on

the foreign exchange market. An event that has a detrimental impact on one
nation could benefit another’s economy; when this occurs, currency exchange
rates between both countries could move in opposing directions.

When trading forex, one must consider that geopolitical events may present
purchasing opportunities. If, for instance, a currency becomes oversold, an
experienced forex trader could view this as an opportunity to acquire that
currency at a reduced price in anticipation of increased value in the future.

Geopolitical events also allow forex traders to diversify their holdings, which is
an effective risk management technique. For instance, someone who already
holds an open position in a currency that could be affected by a geopolitical
event might choose to open another position associated with that same currency
to reduce exposure to additional risk.

Influence of international affairs on foreign exchange market predictions

Geopolitical events have both short and long-term impacts on currency values,
making them unpredictable in the short run. Conversely, geopolitical effects on
economies over longer periods may have an even more lasting impact on
exchange rates over a prolonged period. Therefore, forex traders need to factor

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in any potential influence geopolitical events may have on their trading methods
accordingly.

An illustration of how geopolitical events can impact forex market forecasts

In 2023, the Taiwan Strait experienced a crisis that served as a reminder of how
geopolitical events can influence currency market predictions. China’s military
decision to conduct drills near Taiwan escalated tensions between China and
Taiwan, which precipitated this current conflict. Forex traders were concerned
about any disruption in trade, which could severely destabilise global economic
activity.

Due to this crisis, demand for the Japanese yen, a safe-haven currency, has
grown. Conversely, both Chinese yuan and Taiwanese dollar values have
decreased. Forex traders who had anticipated potential effects on currency
exchange rates may have benefited from this event by employing proper trading
tactics and seizing upon the opportunity presented by the crisis.

How to stay abreast of geopolitical developments ?

Currency traders must stay abreast of geopolitical developments that could

influence the currency market. One way to do this is to keep up with news and
current events in relevant nations/areas. Furthermore, monitoring economic data
releases can give valuable insights into an economy’s health and the possible
effects of shifts in geopolitics on exchange rates between different currencies.
Additionally, some trading systems provide forex traders with real-time news
feeds, alerts, and analysis.

Geopolitical events can heavily impact both currency market projections and
trading techniques. Forex traders can maximise their earnings by staying
informed on the most recent geopolitical developments and their potential
impacts on currency exchange rates. Foreign exchange trader need to keep
abreast of global news and economic data releases to stay ahead of competitors
and make decisions based on accurate information. It is essential to remember
geopolitical events can lead to unexpected outcomes. Therefore, an effective

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risk management plan and readiness for shifts in the foreign exchange market
are necessary.

Forex traders must maintain an objective long-term perspective and avoid

making hasty decisions based on short-term geopolitical events. While these
could temporarily cause changes in currency exchange rates, an effective long-
term trading plan must consider more significant economic trends, market mood
swings and other fundamental variables which could influence exchange rates.

Finally, geopolitical events can majorly influence forex market projections;

thus, forex traders need to stay informed and prepared for potential outcomes.
As a foreign exchange trader, you may benefit from geopolitical events if you
use the tools provided by trading platforms, take a long-term perspective when
selecting your strategy, and utilise all resources provided by these platforms

Political Impact on Currency Prices

A political election—a common event in almost every nation—can have a large
impact on a country's currency. Elections can be viewed by traders as an
isolated case of potential political instability and uncertainty, which typically
equates to greater volatility in the value of a country's currency. In most
situations, forex participants will simply keep an eye on pre-election polls to
get a sense of what to expect and see if there will be any changes at the top.
That's because a change in government can mean a change in ideology for the
country's citizens, which usually equates to a different approach to monetary
or fiscal policy, each serving as big drivers of a currency's value.

Additionally, political parties or individuals who are seen as more fiscally

responsible or concerned with promoting economic growth tend to boost a
currency's relative value. For instance, an incumbent who is seen as a "pro
economy" that is in danger of losing their position of power may lead to
currency drops for fears of limited future economic growth and predictability.

Another circumstance of great importance is an unexpected election. Whether

it comes via a non-confidence vote, corruption scandals, or other situations,
unplanned elections can wreak havoc on a currency. For example, cases of
upheaval among citizens that result in protests or work stoppages can cause
great uncertainty in countries and increased political instability. Even in cases
where an autocratic government is being challenged in favor of a new, more
democratic, and economically open-minded government, forex traders don't
like the uncertainty. Political instability has a tendency to outweigh any

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positive outcomes from a new government in the short run, and related
currencies will usually suffer losses.

However, basic valuation factors and principals will once again apply, and

currencies should settle at or around a rate indicative of the country's economic
growth prospects over the long term.

Impact of Natural Disasters on Currency Prices

The fallout from a natural disaster can be catastrophic for a country.
Earthquakes, floods, tornadoes, and hurricanes harm a country's citizens,
morale, and infrastructure. Additionally, such disasters will also have a
negative effect on a nation's currency. The loss of life, damage to major
factories and distribution centers, coupled with the uncertainty that inevitably
comes with natural disasters, are all bad news for a currency.

Infrastructure damage is also a key concern when it comes to the impact of

natural disasters. The fact that basic infrastructure is the backbone of any
economy breaks in that infrastructure can severely limit the economic output of
a region. Furthermore, the additional costs that are incurred to clean up and
rebuild after a disaster take away from government and private spending that
could have been used towards economically advantageous ventures, rather than
towards patching up a break in the value chain from damages in infrastructure.

Add to this a probable decrease in consumer spending due to the economic

uncertainty and a possible loss of consumer confidence, and any economic
strengths can be turned into economic weaknesses. In all, a natural disaster will
almost surely negatively affect a nation's currency.

Effect of War on Currencies

Unlike a currency war, wherein countries actively attempt to devalue their
currencies to aide their domestic economies in global export trading, a physical
war can be far more devastating to a country's economy. Much like a natural
disaster, the impact of war is brutal and widespread. Similar to disasters, the
damage of war to infrastructure deals a huge blow to a nation's short-term
economic viability, costing citizens and governments billions of dollars.

History has shown than war rebuilding efforts must often be financed with
cheap capital resulting from lower interest rates, which inevitably decrease the
value of domestic currency. There is also a huge level of uncertainty
surrounding such conflicts on future economic expectations and the health of
affected nations. Thus, nations that are actively at war experience a higher level
of currency volatility compared to those not engaged in conflict.

22
That said, some economists believe that there is a potential economic upside to
war. War can kick-start a fledgling economy, especially its manufacturing base
when it is forced to concentrate its efforts on war time production. For instance,
the U.S. entry into World War II following the attacks on Pearl Harbor helped
pull the country out of the grips of the Great Depression. While there is some
historical precedent for this viewpoint, most would agree that an improved
economy at the cost of human lives is a very poor trade-off.

The Bottom Line

Political turmoil, natural disasters, and war are just a few events that can have a
profound effect on the currency markets. A great deal of a currency's value is
derived from the economic strength of a nation, and any unforeseen uncertainty
to future economic forecasts will typically not work in a currency's favour.
While it is very difficult to plan for the unexpected in the forex market, an
informed trader will use global events as a primary indicator within a
comprehensive trading strategy.

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 1. CHAPTER-4 CONCLUSIONS AND
RECOMMENDATIONS
This research aims to deepen our understanding of the impact of geopolitical
events on Forex market risk and provide valuable insights for market
participants, financial institutions, and policymakers. By developing accurate
risk measurement models and effective risk management strategies, this study
aims to enable market participants to navigate the challenges posed by
geopolitical events and enhance their ability to manage and mitigate Forex
market risk effectively.

Implications of Research :-

The current study benefits the companies having foreign operations in

mitigating the currency exposures. It also benefits other participants in forex
market such as bankers to devise innovative currency derivative instruments and
also helps the government and policy makers to find out loopholes in the current
derivative instruments and modify accordingly.

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4.1- Conclusions
4.2-RECOMMENDATION AND REFERENCES:-

 WEBSITES

 www.forex.com
 www.rbi.org
 www.genius-forecasting.com
 www.Risk-management.guide.com
 www.forexcentre.com
 www.kshitij.com
 www.Fxstreet.com
 www.Mensfinancial.com
 www.StandardChartered.com
 www.easy-forex.com

NEWSPAPERS

 Economic Times,

 Business Standard &

 Business line

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BOOKS

 International finance by P.G.APTE

 Options, Futures and other Derivatives by JOHN C HULL.
 Management of Foreign Exchange by BIMAL JALAN
 Foreign Exchange Markets by P.K. Jain
 E-BOOKS on Trading Strategies in Forex Market.

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