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Multiple Currencies and Hedging

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Author Info

  • Broll, Udo
  • Wong, Kit Pong
  • Zilcha, Itzhak

Abstract

This paper presents a model of a competitive exporting firm confronting multiple currency risks. Future markets do not exist for the firm's own currency, but do exist between currencies of two countries to which the firm exports its entire output. We provide analytical insight into optimal cross-hedging and its implications on production and on trade flows. We show that the unbiasedness of the cross-currency futures market does not imply non-random profits. Furthermore, the availability of cross-hedging opportunities has no effects on production but does have effects on exports. Copyright 1999 by The London School of Economics and Political Science

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 66 (1999)
Issue (Month): 264 (November)
Pages: 421-32

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Handle: RePEc:bla:econom:v:66:y:1999:i:264:p:421-32

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Citations

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Cited by:
  1. Claus-Friedrich Laaser & Franco Reither & Holger Görg & Udo Broll & Christian Pierdzioch, 2000. "Book reviews," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 136(3), pages 560-571, 09.
  2. Lien, Donald & Wong, Kit Pong, 2005. "Multinationals and futures hedging under liquidity constraints," Global Finance Journal, Elsevier, vol. 16(2), pages 210-220, December.
  3. Wong Kit Pong, 2002. "Export-Flexible Firms and Forward Markets," International Economic Journal, Taylor & Francis Journals, vol. 16(3), pages 81-95.
  4. Udo Broll & Peter Welzel & Kit Pong Wong, 1999. "Strategic Hedging," Working Paper Series B 1999-04, Friedrich-Schiller-Universität Jena, Wirtschaftswissenschaftliche Fakultïät.
  5. Broll, Udo & Eckwert, Bernhard, 2009. "Modelling information and hedging: The exporting firm," Economic Modelling, Elsevier, vol. 26(5), pages 974-977, September.
  6. Broll, Udo & Wong, Kit Pong, 2002. "Optimal full-hedging under state-dependent preferences," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(5), pages 937-943.
  7. Frestad, Dennis, 2010. "Corporate hedging under a resource rent tax regime," Energy Economics, Elsevier, vol. 32(2), pages 458-468, March.
  8. Broll, Udo & Wong, Kit Pong, 2011. "Cross-hedging of correlated exchange rates," Dresden Discussion Paper Series in Economics 04/11, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  9. Broll, Udo & Wahl, Jack E. & Wessel, Christoph, 2008. "Export production, hedging exchange rate risk: the duopoly case," Dresden Discussion Paper Series in Economics 06/08, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  10. Broll, Udo & Eckwert, Bernhard, 2009. "Modelling information and hedging: the exporting firm," Dresden Discussion Paper Series in Economics 02/09, Dresden University of Technology, Faculty of Business and Economics, Department of Economics.
  11. Udo Broll & Jack E. Wahl & Christoph Wessel, 2011. "Export, Exchange Rate Risk and Hedging: The Duopoly Case," German Economic Review, Verein für Socialpolitik, vol. 12(4), pages 490-502, November.
  12. Ariane Breitfelder & Udo Broll & Kit Pong Wong, 2008. "Wages, Employment and Futures Markets," Finnish Economic Papers, Finnish Economic Association, vol. 21(2), pages 118-123, Autumn.
  13. Axel F. A. Adam-Müller, 2001. "What to Do if Dollar is Not a Dollar? The Impact of Inflation Risk on Production and Risk Management," CoFE Discussion Paper 01-06, Center of Finance and Econometrics, University of Konstanz.
  14. Broll, Udo & Mallick, Rajiv & Wong, Kit Pong, 2001. "International trade and hedging in economies in transition," Economic Systems, Elsevier, vol. 25(2), pages 149-159, June.
  15. Harald Battermann & Udo Broll, 2004. "Price uncertainty, future markets and correlation," International Economic Journal, Taylor & Francis Journals, vol. 18(2), pages 237-243.
  16. Udo Broll & Kit Wong, 2006. "Multinationals, Hedging, and Capital Structure under Exchange Rate Uncertainty," Open Economies Review, Springer, vol. 17(1), pages 103-114, January.
  17. Udo Broll & Peter Welzel & Kit Wong, 2009. "Export and Strategic Currency Hedging," Open Economies Review, Springer, vol. 20(5), pages 717-732, November.
  18. Nicolas Péridy, 2003. "Exchange rate volatility, sectoral trade, and the aggregation bias," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 139(3), pages 389-418, September.
  19. Wong, Kit Pong, 2006. "Foreign direct investment and forward hedging," Journal of Multinational Financial Management, Elsevier, vol. 16(5), pages 459-474, December.
  20. Kit Pong Wong, 2001. "Currency Hedging For Export-Flexible Firms," International Economic Journal, Taylor & Francis Journals, vol. 15(1), pages 165-174.

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