Corporate strategies for currency risk management

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2019

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Tekcan, İsmail Berat

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For many years, forecasting the sales has been thought as a significant fundamental for the companies that operate in fast moving consumer goods (FMCG) sector. Companies that are successful in predicting their sales, also have the strength to manage company’s financials. Also, companies have the chance to react to tough situations that they might face. In the academic literature, there exist many studies about forecasting the future of sales. However, there are limited studies about how the companies forecast their gross to net spending apart from gross sales. This thesis aims to present a model constituted from several steps of sales process and aims to contribute the academic literature with that model. It also analyzes the process of performing a sales organization in Turkey. The performance of this organization is affected by many materials such as goods’ costs, margins, foreign currency rates, strategy calls and order breakdown. These materials are studied in the light of the historical data which are hypothetical but related with FMCG sector. The impact of foreign exchange (FX) rate on the goods and its fluctuations are discussed alongside the gross to net forecasting for different type of orders. In forecasting, Geometric Brownian Motion and ARIMA models are used. Excess amount of gross to net spending is calculated by using Monte Carlo simulation, how the organization decides to pass over the excess amount is explained. Finally, different derivatives are suggested to help the organization to hedge its position.

Subject Keywords

Corporations., GTN Forecasting, ARIMA Model, Geometric Brownian Motion, Monte Carlo Simulation, Hedging.

URI

http://etd.lib.metu.edu.tr/upload/12624053/index.pdf
https://hdl.handle.net/11511/44456

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Graduate School of Applied Mathematics, Thesis

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Citation Formats

İ. B. Tekcan, “Corporate strategies for currency risk management,” Thesis (M.S.) -- Graduate School of Applied Mathematics. Financial Mathematics., Middle East Technical University, 2019.