ABSTRACT:
This paper investigates the practices of Malaysian exporters of palm products in managing their exposure towards fluctuations in exchange rates and the level of awareness towards this exposure. The study was conducted on the 261 companies that were registered with the Malaysian Palm Oil Board for exporting palm products. Data related to exchange rate risk exposure and the risk mitigation strategies were collected by distributing a survey form via e-mail and facsimile as well as through random telephone interviews. The results show that the Malaysian exporters of palm products are commendably aware on their exposure towards exchange rate risk. However, not all of them manage their exchange rate risk by using the available hedging instruments. The Malaysian exporters of palm products are found to favour the use of forward contracts over the options contracts to minimise their risk.
Keywords: exchange rate risk, risk mitigation, forward contract, palm products
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