환헤지 통화옵션 상품의 손실 현황과 대응방안: KIKO(Knock-In Knock-Out) 거래를 중심으로

The purpose of this study is to provide a case study analysis of Knock-In Knock- Out (KIKO), a derivative security for foreign exchange hedge. Specifically, we examine the transaction structure of KIKO, damages faced by companies, and plans of the government and banks to support those companies. While it is difficult to judge whether or not KIKO was an unfair trade, our analysis reveals that over-hedged companies were severely damaged. On 31st October 2008, the government announced policies to provide liquidity to companies who suffered from KIKO, and suggested a possibility that future losses due to derivatives may be compensated. In addition, the improvement of accounting rules related to the loss from the valuation of derivatives were enacted by Korea Accounting Standards Board. Banks are also seeking to find solutions such as providing loan and extending the maturity of the existing loans for the small- and medium-size firms suffering from temporary liquidity problems. In sum, this case study illustrates how to cope with foreign exchange risks, and provides basic knowledge on currency option derivatives to prevent future problems.