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Currency risks hedging for major and minor currencies: constant hedging versus speculative hedging

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  • Myoung Shik Choi

Abstract

Focusing on the recent experience of major and minor currencies, this study examines the effectiveness of constant hedge and speculative hedge respectively with the objective of identifying whether there are any significant differences between both hedges. Our finding is that the speculative hedge is very slightly more effective than the constant hedge in reducing the currency risk. This supports that the speculative hedge about major currencies can be a relevant hedging tool. The analysis also shows that our multiple currency futures hedge can be a good hedging instrument for some minor currencies such as Cyprus pound.

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  • Myoung Shik Choi, 2010. "Currency risks hedging for major and minor currencies: constant hedging versus speculative hedging," Applied Economics Letters, Taylor & Francis Journals, vol. 17(3), pages 305-311, February.
  • Handle: RePEc:taf:apeclt:v:17:y:2010:i:3:p:305-311
    DOI: 10.1080/13504850701735757
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