Essay regarding Foreign Exchange Unpredictability: Group hedge theory and Lebanese SMEs

Middle East University

Faculty of Organization Administration

Foreign currency volatility: Group

hedging theory and Lebanese SMEs

A Thesis

Presented in Incomplete Fulfillment

in the Requirements for the Degree

Learn of Organization Administration

By simply

George Issa

June 2014

FOREIGN EXCHANGE MOVEMENTS: GROUP HEDGING THEORY

AND LEBANESE SMEs

A thesis

presented in partial completion

of the requirements for the amount

Master of Business Government

By: George Issa

APPROVAL BY THE PANEL:

------------------------------- -------------------------------------

Paul Abboud, Ph. M., Chairperson

------------------------------- ------------------------------------Denny Rumamby, Ph. Deb., Second Reader ------------------------------- ------------------------------------Patrizia Hongisto, Ph. D., Teachers Dean

Date approved

-----------------------------

I

Commitment

To everyone who will utilize my research.

To everyone who will get pleasure from reading every page!

To mom and dad and my beautiful sisters.

To the memory of my dad.

II

Acknowledgments

I would like to thank my university's bigger management showed by the kind Dean of Business Dr . Patrizia Hongisto.

A feel of honor remains to my thesis mentor, Doctor Paul Abboud who offered me the supporting hand to create this last thesis. Big thanks to my second visitor, Dr . Denny Rumambi for his fruitful comments.

Thanks a lot extended to my employers at the Lebanese Armed Forces pertaining to the opportunity they granted me to follow the MBA plan at MEU. To my family and close friends whom that they missed my personal presence during the long hours spent preparing for this kind of thesis: Make sure you understand myself, I love you all. I actually am grateful to everyone who taken care of immediately my survey questions and this I might include bothered with my telephone calls to get the required information that helped the success of this analysis.

III

Summary

Foreign Exchange movements has become a major obstacle pertaining to international dealers. Making payments or collecting revenues in foreign currencies may harm the company's profit margins and leaves this under the money risk of the transaction!

Despite having the presence of economical derivatives that could limit the exposure of those traders, many Lebanese SMEs do frequently change goods prices to reflect exchange rate changes.

That is because of either towards the lack of economic knowledge during these markets or due to deal costs sustained to financial intermediaries or both. Price volatility can negatively impact the customers' dedication and could force them store their products coming from competitors'. Much larger businesses one or two different hedging strategies using a goal to reach Price steadiness as it is one of the main customer retention strategies.

In our paper, all of us will complex the Obegi " group hedging theory", its advantages to the many entities and exactly how the other Lebanese SMEs, who aren't capable of investing on financial organizations, could take advantage of such encounter.

IV

The paper illustrates the importance of obtaining one foreign currency pertaining to international operate. The SDR which is backed by major hard currencies symbolizing more than many of these of the world's output, is going to eliminate none local foreign currencies nor the role of speculators available in the market, but will eliminate the currency risk exposure of traders in weaker economies and make sure they are alive in a highly unstable world and safeguards their Purchasing Electrical power Parity. Keywords: Currency Risk; Hedging; SMEs; Volatility; Purchase costs; Group hedging; BTA; SDR; Supposition.

V

List of tables:

Table 1: Import/ Export of products in Lebanon denominated in US$ …….. 6 Desk 2: Netting table by different money exposure…………………. thirty six Table 3: Comparative desk between diverse hedging alternatives………46

VI

Stand of articles:

Dedication.......................................................................................................................... II Acknowledgments...

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in transition Financial systems

http://www.sciencedirect.com/science/article/pii/S0147596798915578

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