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Fundamentals of corporate currency exposure

  • O'Brien, Thomas J.
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    I model the relation between corporate currency exposure and fundamental variables like demand elasticities and operating cost structure. The currency location of a firm's operating costs may be in the home currency, the foreign currency, or partially in each. I start with a single-firm setting and extend the results to a competitive setting. The model should help managers better understand the determinants of currency exposure and thus better perform the important tasks of strategic planning and managing enterprise risk.

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    File URL: http://www.sciencedirect.com/science/article/B6VGT-4YWC14X-1/2/ffd950309bac27e58293735da297eea1
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    Article provided by Elsevier in its journal Journal of International Financial Markets, Institutions and Money.

    Volume (Year): 20 (2010)
    Issue (Month): 3 (July)
    Pages: 310-321

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    Handle: RePEc:eee:intfin:v:20:y:2010:i:3:p:310-321
    Contact details of provider: Web page: http://www.elsevier.com/locate/intfin

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    1. Muller, Aline & Verschoor, Willem F.C., 2006. "Foreign exchange risk exposure: Survey and suggestions," Journal of Multinational Financial Management, Elsevier, vol. 16(4), pages 385-410, October.
    2. Marston, Richard C., 2001. "The effects of industry structure on economic exposure," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 149-164, April.
    3. Campa, Jose Manuel & Goldberg, Linda S, 1999. "Investment, Pass-Through, and Exchange Rates: A Cross-Country Comparison," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(2), pages 287-314, May.
    4. Booth, Laurence, 1991. "The Influence of Production Technology on Risk and the Cost of Capital," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 26(01), pages 109-127, March.
    5. Entorf, Horst & Moebert, Jochen & Sonderhof, Katja, 2007. "The foreign exchange rate rate exposure of nations," ZEW Discussion Papers 07-005, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    6. Gordon M. Bodnar & M.H. Franco Wong, 2003. "Estimating Exchange Rate Exposures: Issues in Model Structure," Financial Management, Financial Management Association, vol. 32(1), Spring.
    7. Doidge, Craig & Griffin, John & Williamson, Rohan, 2006. "Measuring the economic importance of exchange rate exposure," Journal of Empirical Finance, Elsevier, vol. 13(4-5), pages 550-576, October.
    8. Allayannis, George & Ihrig, Jane, 2001. "Exposure and Markups," Review of Financial Studies, Society for Financial Studies, vol. 14(3), pages 805-35.
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