Advanced Search
MyIDEAS: Login

Demand for Foreign Exchange Derivatives in Brazil: Hedge or Speculation

Contents:

Author Info

  • Fernando N. de Oliveira
  • Walter Novaesk
Registered author(s):

    Abstract

    This paper examines empirically the demand of foreign exchange derivatives by Brazilian corporations. We build an original database of 25,457 contracts of foreign exchange swaps between firms and financial institutions open at the end of 2002. From these contracts we identify 53 corporations that hedge in the foreign exchange derivatives market and 40 corporations that speculate. The data show that the existence of external debt and the size of the company affect positively the probability of hedging, whereas revenues from exports affect positively the probability of speculation. These results suggest that during periods of great volatility of the exchange rate – such as in 2002 – the corporations’ demand for foreign exchange derivatives is strongly related to speculative motives.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://www.bcb.gov.br/pec/wps/ingl/wps152.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 152.

    as in new window
    Length:
    Date of creation: Dec 2007
    Date of revision:
    Handle: RePEc:bcb:wpaper:152

    Contact details of provider:
    Web page: http://www.bcb.gov.br/?english

    Related research

    Keywords:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. Mian, Shehzad L., 1996. "Evidence on Corporate Hedging Policy," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(03), pages 419-439, September.
    2. Mayers, David, 1998. "Why firms issue convertible bonds: the matching of financial and real investment options," Journal of Financial Economics, Elsevier, vol. 47(1), pages 83-102, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Rossi, José Luiz Júnior, 2011. "Hedge or Speculation? Evidence of the use of derivatives by Brazilian firms during the financial crisis," Insper Working Papers wpe_243, Insper Working Paper, Insper Instituto de Ensino e Pesquisa.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:bcb:wpaper:152. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Francisco Marcos Rodrigues Figueiredo).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.