Minimizing the maximum risk of currency conversion for a company buying abroad

Abstract

Purpose: The relevance of the study is due to the fact that the task of determining the moment of transition from one currency to another arises for each organization, which is not limited to work in the domestic market. This article is aimed at solving the problem of performing the operation of required sale (exchange) of the available currency to pay for goods to a foreign supplier. Design/Methodology/Approach: There are two days to complete the exchange, which must be completed in no more than two steps. In the literature, the leading approach to solving this problem is the prediction of the exchange rate. Findings: The solution proposed in this article is based on Savage's criteria (regret metric). We minimize the maximum risk of unprofitable exchange. This allows you to prevent large deviations from the minimum possible amount of sale of the available currency necessary to purchase a given amount in another currency. Practical Implications: The article presents the prerequisites for the emergence of the task of determining the moment of transition from one currency to another, reveals the specifics of this task in Russian companies, identifies the main tools for solving problems of this type, justifies the use of the proposed approach to solve this problem. Originality/Value: Article submissions are of practical value for managers of companies trading with constant foreign partners, especially under the condition that the operations of converting a significant sum fulfil often, but not daily.