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Hedging Foreign Exchange Risk in Chile: Markets and Instruments

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Author Info

  • Jorge A. Chan-Lau

Abstract

Policy makers have expressed interest in fostering the development of local foreign exchange derivatives markets with a view to reducing risks arising from currency mismatches between assets and liabilities in the corporate sector. This paper assesses foreign exchange exposure in the corporate sector in Chile, analyzes the current state of the foreign exchange derivatives market in Chile, and argues that liquid and developed foreign exchange derivatives markets can help promote financial stability.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/37.

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Length: 23
Date of creation: 01 Feb 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/37

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Keywords: Markets;

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References

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  1. Ricardo J. Caballero & Kevin Cowan & Jonathan Kearns, 2005. "Fear of Sudden Stops: Lessons from Australia and Chile," Research Department Publications 4363, Inter-American Development Bank, Research Department.
  2. Detemple, Jerome & Jorion, Philippe, 1990. "Option listing and stock returns : An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 14(4), pages 781-801, October.
  3. Garman, Mark B. & Kohlhagen, Steven W., 1983. "Foreign currency option values," Journal of International Money and Finance, Elsevier, vol. 2(3), pages 231-237, December.
  4. Viviana Fernández, 2002. "The Derivatives Markets in Latin America with an Emphasis on Chile," Documentos de Trabajo 128, Centro de Economía Aplicada, Universidad de Chile.
  5. World Bank & International Monetary Fund, 2004. "Financial Sector Assessment : Chile," World Bank Other Operational Studies 15819, The World Bank.
  6. 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.
  7. Moguillansky, Graciela, 2002. "Non-Financial Corporate Risk Management and Exchange Rate Volatility in Latin America," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  8. Conrad, Jennifer, 1989. " The Price Effect of Option Introduction," Journal of Finance, American Finance Association, vol. 44(2), pages 487-98, June.
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Cited by:
  1. Shotar, M.M. & El-Mefleh, M.A., 2009. "Economic Exposure To Exchange Rates In Jordan Companies: A Monthly Econometric Model Of The Rate Of Return Of Firms, 2004-2007," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 9(1).
  2. Lourdes Treviño, 2005. "Development and volume growth of organized derivatives trade in emerging markets," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 31-82, November.
  3. Jose Berrospide, 2008. "Exchange rates, optimal debt composition, and hedging in small open economies," Finance and Economics Discussion Series 2008-18, Board of Governors of the Federal Reserve System (U.S.).
  4. Sweta Saxena & Agustin Villar, 2008. "Hedging instruments in emerging market economies," BIS Papers chapters, in: Bank for International Settlements (ed.), Financial globalisation and emerging market capital flows, volume 44, pages 71-87 Bank for International Settlements.

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