The Application of VaR Model in the Interest Rate and Exchange Rate Risk Management of Enterprises Overseas Investment

Abstract

The internationalization of enterprises has been accelerated constantly in China in recent years. However, the instability of international financial markets forms serious challenge to enterprise risk management of interest rate and exchange rate. In the paper, the interest rate and exchange rate risks faced by enterprise in overseas investment are analyzed. The feasibility of applying VaR method in the enterprise overseas investment interest rate and exchange rate risk management is proposed. In addition, the historical simulation method and Monte Carlo method are adopted for empirical research on interest rate risk in enterprise overseas investment on the basis of VaR model. Finally, related suggestions of strengthening interest rate and exchange rate risk management in enterprise overseas investment are proposed.