FOREIGN EXCHANGE RISKS IN CONSTRUCTION CONTRACTS

Abstract

The downturn in the local construction market in recent years into has initiated many construction firms to venture overseas work. currencies Foreign contracts are quoted foreign and as such, profitability will affected by the exchange rate fluctuations among currencies involved. in be the This project will study some hedging strategies used to minimize the foreign exchange risks. The strategies are restricted to options and futures trading. The currencies involved are the U.S. dollar, the German Mark and the British Pound. The methods of technical analysis are the Channel Trendlines, the Simple Moving Averages and the Elliot Wave Theory. The strategies are backtested with financial data collected over a period of one year. The final outcome of each strategy is then compared and evaluated based on their cost and risk-reward characteristics.