IDEAS home Printed from https://ideas.repec.org/a/bla/reviec/v4y1996i3p282-86.html
   My bibliography  Save this article

Cross-Hedging of Exchange-Rate Risk

Author

Listed:
  • Broll, Udo
  • Eckwert, Bernhard

Abstract

For currencies with highly developed forward markets a well-known separation theorem holds which implies that international firms fully hedge the exchange rate risk if the forward markets are unbiased. In this paper we present a model of a risk-averse firm when perfect hedging instruments are not available. Instead the firm can cross-hedge the exchange-rate risk by using the forward markets of a third country's currency. We demonstrate that the unbiasedness of all forward markets does not imply full hedge, although the firm has the option to hedge all the risks. Copyright 1996 by Blackwell Publishing Ltd.

Suggested Citation

  • Broll, Udo & Eckwert, Bernhard, 1996. "Cross-Hedging of Exchange-Rate Risk," Review of International Economics, Wiley Blackwell, vol. 4(3), pages 282-286, October.
  • Handle: RePEc:bla:reviec:v:4:y:1996:i:3:p:282-86
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Citations

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


    Cited by:

    1. Broll, Udo & Eckwert, Bernhard, 1998. "Export and Hedging Decision with State-Dependent Utility," International Review of Economics & Finance, Elsevier, vol. 7(3), pages 247-253.
    2. Björn Döhring, 2008. "Hedging and invoicing strategies to reduce exchange rate exposure - a euro-area perspective," European Economy - Economic Papers 2008 - 2015 299, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
    3. Röthig, Andreas, 2008. "The impact of backwardation on hedgers' demand for currency futures contracts: theory versus empirical evidence," Darmstadt Discussion Papers in Economics 190, Darmstadt University of Technology, Department of Law and Economics.
    4. Broll, Udo & Wong, Kit Pong, 2011. "Cross-hedging of correlated exchange rates," Dresden Discussion Paper Series in Economics 04/11, Technische Universität Dresden, Faculty of Business and Economics, Department of Economics.
    5. Broll Udo, 1999. "Export as an Option," International Economic Journal, Taylor & Francis Journals, vol. 13(1), pages 19-26.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:reviec:v:4:y:1996:i:3:p:282-86. 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: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0965-7576 .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.