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Forward contracts on the exchange rate

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  • Leoš Souček
  • Michal Tomek

Abstract

The aim of the paper is to present one out of conceivable approaches to problems of foreign exchange rates and subsequently forward contracts on them. Our approach, based on stochastic analysis, provides an untraditional view of the issues. Within the framework of this paper we model the USD/CZK exchange rate on the basis ofthe geometric Brownian motion. Obtained results entitle the use as a complementory tool when managing the exchange rate risk.

Suggested Citation

  • Leoš Souček & Michal Tomek, 1997. "Forward contracts on the exchange rate," Bulletin of the Czech Econometric Society, The Czech Econometric Society, vol. 4(6).
  • Handle: RePEc:czx:journl:v:4:y:1997:i:6:id:40
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    File URL: http://ces.utia.cas.cz/bulletin/index.php/bulletin/article/view/40
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