Risk-cost analysis of currency exposure reduction for currency exposure management

An article of manufacture comprising a computer readable storage medium having content stored thereon to provide instructions to cause a machine to perform operations including:

• obtaining foreign currency exposure data for a company having exposure in multiple currencies;
• generating a hypothetical exposure reduction action for each currency exposure to eliminate the currency exposure;
• obtaining a numeric representation for a value-at-risk (VaR) for each foreign currency exposure, the VaR being an amount having exposure adjusted by a volatility value for the currency pair of the currency exposure;
• obtaining a numeric representation for a cost (C) to implement each hypothetical exposure reduction action;
• for a number N of currency exposures having an associated hypothetical exposure reduction action with a net negative cost (C):
• computing an associated ratio of VaR to C for each currency exposure;
• ordering currency exposures 1 through N based on their associated ratios from largest negative to smallest negative;
• determining a starting total VaR and a starting C for the N ordered currency exposures;
• and
• computing cumulative values for each of the currency exposures ordered 1 through N, each nth currency exposure including a cumulative remaining VaR equaling a sum of the total starting VaR and a VaR reduction of the nth currency exposure and VaR reductions for all preceding currency exposures, and a cumulative C equaling a sum of the starting C and the C of the nth currency exposure and the Cs of all preceding currency exposures;
• and
• creating an output representation of cumulative remaining value-at-risk versus accumulated cost from the computed cumulative values.