The Effect of Risk Management Instruments on Foreign Exchange Exposure by Unit Trust Companies in Kenya
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Date
2013-10Author
Kuria, Raphael N
Type
ThesisLanguage
enMetadata
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The main objective of the study was to find out the effects of risk management instruments on
foreign exchange exposure by unit trusts companies in Kenya. The research design was
descriptive which involved the use of quantitative data. The sample size constituted of 47 firms
that were registered with capital markets authority of Kenya and trading in unit trusts. Results of
43 firms were analysed after eliminating questionnaires that were not filled by the respondents,
spoilt and inconsistent questionnaires. The research utilized questionnaires for data collection
comprising of structured questions. In analyzing the responses, Statistical Package for Social
Sciences (SPSS Version 20) was used. This generated descriptive statistics such as percentages,
frequency distribution, measures of central tendency and graphical expressions.
The study found that firms use local currencies in doing their business and this exposes them to
foreign exchange risks because all the major hard currencies of international transaction are
sources of foreign exchange risk. This further increases the risk because developing countries
like Kenya have less developed financial systems. The study also found out that firms invoice
foreign currency as internal/ natural risk management technique and currency swaps as external
technique to mitigate foreign exposure. The study concluded that as found out in this study, the
exchange rate risk faced by firms formed a significant component of their risk profile. It is
important that firms trading in unit trusts effectively manage their risk to minimize their
exposure to exchange rate risk. These risks occur as a result of changes occurring in local and
global financial cycles.
Citation
Degree of Master of Science in FinancePublisher
University of Nairobi School of Business
Description
A research project submitted in partial fulfillment for the
award of the Degree Of Master Of Science Finance; University Of
Nairobi