Demand for Foreign Exchange Derivatives in Brazil: Hedge or Speculation
AbstractThis 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 InfoIf 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.
Bibliographic InfoPaper provided by Central Bank of Brazil, Research Department in its series Working Papers Series with number 152.
Date of creation: Dec 2007
Date of revision:
Contact details of provider:
Web page: http://www.bcb.gov.br/?english
This paper has been announced in the following NEP Reports:
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- 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.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Benjamin Tabak).
If references are entirely missing, you can add them using this form.