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Offshore Bidding and Currency Futures

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Author Info

  • Donald Lien

    (Department of Economics, University of Texas at San Antonio, U.S.A.)

  • Fathali Firoozi

    (Department of Economics, University of Texas at San Antonio, U.S.A.)

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    Abstract

    In an interactive model of offshore bidding, two firms located in two different countries bid on a project in a third country under exchange rate uncertainty. Every firm benefits and provides a higher bid when both firms have hedging opportunities. Even if only one bidder has the hedging opportunity, both bidders gain through an increase in their expected utilities.

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    File URL: http://www.ijbe.org/table%20of%20content/pdf/vol7-2/vol7-2-03.pdf
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    Bibliographic Info

    Article provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.

    Volume (Year): 7 (2008)
    Issue (Month): 2 (August)
    Pages: 125-136

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    Handle: RePEc:ijb:journl:v:7:y:2008:i:2:p:125-136

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    Postal: 100 Wenhwa Road, Seatwen, Taichung
    Web page: http://www.ijbe.org/
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    Related research

    Keywords: exchange rate; futures markets; uncertainty; game theory; multinational enterprise;

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    References

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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    1. Niclas Hagelin, 2003. "Why firms hedge with currency derivatives: an examination of transaction and translation exposure," Applied Financial Economics, Taylor & Francis Journals, vol. 13(1), pages 55-69.
    2. Baye, M.R. & Kovenock, D. & De Vries, C.G., 1992. "Rigging the Lobbying Process: An Application of the All- Pay Auction," Papers 9-92-2, Pennsylvania State - Department of Economics.
    3. Haigh, Michael S. & Holt, Matthew T., 2002. "Hedging Foreign Currency, Freight And Commodity Futures Portfolios: A Note," Working Papers 28573, University of Maryland, Department of Agricultural and Resource Economics.
    4. Shang-Jin Wei, 1998. "Currency Hedging and Goods Trade," NBER Working Papers 6742, National Bureau of Economic Research, Inc.
    5. Lioui, Abraham & Poncet, Patrice, 2002. "Optimal currency risk hedging," Journal of International Money and Finance, Elsevier, vol. 21(2), pages 241-264, April.
    6. Moody, Carlisle E, 1994. "Alternative Bidding Systems for Leasing Offshore Oil: Experimental Evidence," Economica, London School of Economics and Political Science, vol. 61(243), pages 345-53, August.
    7. Crabb, Peter R., 2002. "Multinational corporations and hedging exchange rate exposure," International Review of Economics & Finance, Elsevier, vol. 11(3), pages 299-314.
    8. Lien, Donald & Wong, Kit Pong, 2004. "Optimal bidding and hedging in international markets," Journal of International Money and Finance, Elsevier, vol. 23(5), pages 785-798, September.
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