• Korean System Dynamics Review
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• v.15 no.4
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• pp.5-28
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• 2014

Derivatives can be easily bought by those companies that need to hedge foreign currency debt or foreign currency assets through the financial market, considering their exchange rate exposure from international trade. The derivatives market has been growing rapidly due to the needs for investment and hedging. To manage foreign exchange risk, companies hedge risks through financial derivatives. According to our study, hedging is an effective way to mitigate the impact of exposure to exchange risk, as long as companies are only hedging underlying assets. Yet, covetous attitude toward the profit from derivatives and unexpected changes in exchange rate can cause problems for companies. This study analyzed the structural risks of derivatives with analysis of system dynamics. In particular, many companies suffered substantial loss due to KIKO during the economic crisis. We explained the problem therein through dynamic analysis. In addition, we revealed the structural problem that could cause a sudden spike in losses through simulations.

• Journal of Korea Port Economic Association
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• v.31 no.2
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• pp.103-114
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• 2015

The exchange rate volatility during the global financial crisis in 2007-2009 led Korean shipbuilding companies to face currency risk. The use of foreign currency derivatives to take a risk in financial exposure affects them significantly. This research analyzes how the use of foreign currency derivatives affects the Korean shipbuilding industry in relation to its foreign sales by company type and over time, especially before and after the crisis period. It is based on statistical data presented by KOSHIPA and KOSIC in 2001-2014. The results of the analysis show that there is a significant relationship between foreign currency derivatives and foreign currency exposure for all firm sizes and years, but no relationship between them overtime.