The Application of a VAR Approach in Foreign Exchange Risk Management

For the foreign exchange risk is a problem an open economy always confronts, the central banks of all of the countries consider maintaining stable the value of currency as an important task and many corporations involving foreign businesses often suffer great losses because of improper treatment of foreign exchange risk. Whether from the macro or the micro angle, the foreign exchange risk has a great effect on the general situation of a country. VaR approach is a new and popular method to keep away the risk. This paper analyzes the inside reasons for foreign exchange risks and explores to use VaR approaches to keep away the foreign exchange risk.