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Information, unternehmensinterne Kommunikation und Risikopolitik
[Information, intra-firm communication and risk policy]

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Author Info

  • Broll, Udo
  • Gilroy, Bernard Michael
  • Wahl, Jack E.

Abstract

Based upon the foundations of mean-variance decision-making theory, we demonstrate that a change in the risk situation of an international enterprise open currency position does not inevitably require a corresponding hedging accommodation. Given a new risk situation, whether a revision of the hedging-strategy is appropriate will depend upon the elasticity of risk aversion. The elasticity of risk aversion is a decisive indicator; however, it is rarely scrutinized in the literature. In addition, our analysis illustrates the cost saving advantages of the applied (μ,σ)-principal compared to the Bernoulli-principal for information procurement processes. Applying the (μ,σ)-principal facilitates and enhances firm-internal communication information levels.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 21731.

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Date of creation: 2003
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Handle: RePEc:pra:mprapa:21731

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Keywords: Exchange rate risk; international trade; hedging; information;

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References

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  1. Kimball, Miles S, 1993. "Standard Risk Aversion," Econometrica, Econometric Society, vol. 61(3), pages 589-611, May.
  2. Gilroy, Bernard Michael, 2001. "Globalisation, multinational enterprises and European integration," MPRA Paper 17972, University Library of Munich, Germany.
  3. Wagener, Andreas, 2002. "Prudence and risk vulnerability in two-moment decision models," Economics Letters, Elsevier, vol. 74(2), pages 229-235, January.
  4. Sinn, Hans-Werner, 1980. "Ökonomische Entscheidungen bei Ungewißheit," Monograph, Mohr Siebeck, Tübingen, edition 1, number urn:isbn:9783169427024, Octomber.
  5. Meyer, Jack, 1987. "Two-moment Decision Models and Expected Utility Maximization," American Economic Review, American Economic Association, vol. 77(3), pages 421-30, June.
  6. Ormiston, Michael B & Schlee, Edward E, 2001. "Mean-Variance Preferences and Investor Behaviour," Economic Journal, Royal Economic Society, vol. 111(474), pages 849-61, October.
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