Designing a Model and Software for Exchange Rate Risk Assessment and Determining Optimum Exchange Portfolio

The banking system, as an intermediate in the role of society’s financial resources allocator, faces different risks relating its activities, such as credit risk, market risk, liquidity risk, operational risk, etc. In this paper, our focus is on market risk, which is influenced by interest rate, exchange rate and other fluctuations, especially on exchange rate risk. By studying the different methods of evaluating this risk, studies and data on this matter, the risk of foreign exchange portfolio is estimated using the VaR method. In this study, theoretical basis of this issue are discussed and the concept was implemented on historical data. The software designed for this approach helps us to evaluate the optimum portfolio of exchange basket according to banks’ obligations and capital and exchange rates fluctuations.