Risk management in forex market: Preparation of exchange rate fluctuation anticipation model

With the introduction of liberalization of the Indian economy^{(in the year 1991)} and many other economies, the matter of survival of economies in isolation is out of question and could prove to be a suicidal thought. Now, with increased industrialization and opening up of economies for trade and commerce, political boundaries of nations have been transgressed by businesses1. However, this opportunity of making money abroad may also bring some inconvenience to the parent company as it might suffer losses or receive eroded profits when the foreign currency is converted to the local currency at prevailing rates. There may be several other examples like this in real and hypothetical scenarios, and those needs to be addressed with prudence. This topic does the same as it calls for an attention towards these risks and precautions/remedies available for the same. Apart from the MNC's, there are people who enter into currency market for speculative gains. These traders do not actually require these foreign currencies but buy/sell them for making profits from the existing market situation. The proportion of these traders is much larger than those who need foreign currency to make payments, give wages etc. With these above mentioned facts, we proceed forward with this paper.