Export as an Option
This note studies the implications of a firm's advantage to allocate production to different markets under exchange rate risk. As exchange rate volatility increases, so does the value of the option to export. The firm's flexibility can be seen as a real hedging instrument. This kind of risk management policy has the advantage that the hedge instrument is sensitive to the realization of foreign spot exchange rates. Multinational firms, especially, can be regarded as flexible firms because of their use of worldwide distribution facilities. [F31, J20]
Volume (Year): 13 (1999)
Issue (Month): 1 ()
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- Broll, Udo & Eckwert, Bernhard, 1996. "Cross-Hedging of Exchange-Rate Risk," Review of International Economics, Wiley Blackwell, vol. 4(3), pages 282-286, October. Full references (including those not matched with items on IDEAS)
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