RISK MANAGEMENT PROCEDURES IN THE AIRLINE
PROJECT SUBMITTED IN PARTIALLY FULFILLMENT
OF THE REQUIREMENTS INTENDED FOR THE DEGREE OF
MASTER OF ARTS
Economic Risk Management
O Sharon Fernando 2006
SUE FRASER UNIVERSITY OR COLLEGE
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Master of Arts
Title of Project:
Risk Management Procedures in the Flight Industry
Dr . Geoffrey Poitras
Dr . Chris Veld
ti? ~ N I actually Y E R ~ I Wibrary
& & several
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This kind of paper reviews the use of financial derivative instruments by non-financial entities to control risk publicity. It provides the key objectives of the nonfinancial firm to enter in to derivative legal agreements with a counterparty and the opportunity of use of these instruments. It is obvious that most businesses use derivative instruments aid cash flows and organization value in contrast to taking positions in contracts for speculative purposes.
The paper targets the risk supervision practices of a specific sector: Airline transportation. The aircarrier industry employs derivative devices primarily to control volatility in jet gasoline prices, rates of interest and forex trading rates. Inspite of the lack of regular information offered in the total annual reports, there is strong data to support the effective usage of derivative tools to manage functioning costs and thereby increase firm worth.
The purpose of this kind of project is usually to explore the usage of derivative tools particularly simply by non economic entities. Existing theories in why value maximizing companies engage in offshoot transactions are reviewed. Many quantitative studies done in the area of risikomanagement for low financial entities use the ideas of capital market flaws as a basis. Underinvestment challenges, taxes, monetary distress costs and managing incentives are cited while reasons why a strong engages in hedge activities.
Several quantitative research have been required for various countries,...