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Hedging Exchange Rate Risk in Gold and Crude Oil Markets<br />

Ku Yee Bui<br />

Supervisor: Dr. Hazman Bin Samsudin<br />

Bachelor of Economics (Natural Resources)<br />

School of Social and Economic Development<br />

In modern business today, financial risk management is an important discipline for<br />

corporations, financial and public institutions. In this paper examines hedging<br />

exchange rate risk in gold and crude oil markets. This study has 36 samples time<br />

series data monthly for Malaysia from 2015 to 2017 using GARCH model. This study<br />

will focus on three things, namely to determine (1) the effectiveness of the gold and<br />

crude oil market as hedges in GDP, (2) to identified the relationship between gold<br />

price, crude oil price and exchange rate in the GDP and (3) to examine the effects of<br />

volatility in exchange rates, gold price and crude oil price as hedge against GDP. The<br />

result show gold and crude oil price variables have negative relationship, while<br />

exchange rates variable are positively correlated. More importantly, this study<br />

highlights the need for dynamic policy making in Malaysia to contain exchange rate<br />

fluctuations using gold price and oil price as instruments.<br />

1448 | UMT UNDERGRADUATE RESEARCH DAY 2018

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