SYSTEM AND METHOD FOR HEDGING CURRENCY EXCHANGE RATE RISK ON EXPORTS AND IMPORTS IN RESPECT OF CURRENCY PAIRS ESPECIALLY US DOLLAR-INDIAN RUPEE

摘要

The present invention relates to a system and method of hedging the currency risk on a pair of currencies in particular USDollar-Indian Rupee for Export and Import transactions. The system comprises means for assigning Dynamic Benchmark rates for the USD-INR exchange rate for predetermined periods especially periods each of forthcoming 12 months. The process is repeated in further predetermined periods for example every month and new Benchmarks are set for the required forthcoming periods for example each of forthcoming 12 months, taking into consideration actual exchange rate movements, whereby the new Benchmark rates are different from the ones set in the previous month and so on. The system further comprises means for tracking errors between the set Benchmarks and the exchange rates that subsequently actually prevail for a particular forecasted period, means for estimation of possible deviation (High/ Low) on either side wherein the said means for estimation receives data from the means for tracking errors and the said error factors are processed by the estimation means so as to indicate a possible deviation (High/ Low) on either side, from the given set of Benchmarks. The system further comprises means which has tools being actuated by a methodology adapted for choosing between different hedging tools available, to cover separately the exchange risk on Exports and Imports. The system further comprises means adapted to hedge a predetermined ratio of the annual exports/imports over a period for example twelfth of the annual Exports/ Imports each month, so as to ensure an average of several hedged rates over a period of 12 months. The system preferably further comprises means for comparing the hedged rates for Exports/ Imports against the Benchmark rates and adapted to compute the profit/loss thereon.