However, banks may choose an alternative strategy - to maximize profits

The essence of it lies in the fact that market participants "play" on the exchange rate to achieve a profit of speculative nature, leaving open foreign exchange position and knowingly exposing an increased risk. In this case, control foreign currency position by considering this? Pattern: long currency position provides earnings with an increase in foreign exchange and prejudice in the event of a decline, and the short - on the contrary. The higher the risk is taken by party, the more profit it can get from the "game" in the exchange rate, but adverse changes in the currency market and its loss will be significant. Converse is also true: reducing the currency risk is not only reducing the likelihood of losses, but also limits the potential of profits. It is this fact has led some foreign exchange market participants, including banks, deliberately leaving their positions protected in the hope of earning extra income from the favorable dynamics of the market parameters. If the bank chose a strategy of profit maximization, there is a need to assess the currency risk and possible consequences of managerial decisions. The volatility and instability in international currency markets constantly encourage banks to seek effective ways to manage financial risks. An analysis of currency risk management and currency positions used in modern banks, reveals two main groups: the control of the currency structure of the balance (positive control), the hedging of currency risk (synthetic Management) Category: Management Operations Commercial Bank | Tags: Strategy