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The hedging effectiveness of currency futures markets

Author

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  • Charles Dale

Abstract

Until very recently, commodity futures were largely ignored by the vast majority of economists. At the same time, markets for foreign currencies were studied by only a relative handful of specialists in international trade and finance. This article examines a subject which overlaps the two very arcane areas of commodity futures and foreign exchange markets, i.e., the hedging effectiveness of currency futures markets. In particular, the present work demonstrates that the futures markets for British pounds, German marks, and Japanese Yen have been as effective as hedging devices as have some of the long-established contracts in agricultural commodity futures.
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Suggested Citation

  • Charles Dale, 1981. "The hedging effectiveness of currency futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 1(1), pages 77-88, March.
    • Handle: RePEc:wly:jfutmk:v:1:y:1981:i:1:p:77-88
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    Cited by:

    1. Batten, Jonathan A. & Kinateder, Harald & Szilagyi, Peter G. & Wagner, Niklas F., 2021. "Hedging stocks with oil," Energy Economics, Elsevier, vol. 93(C).
    2. Banerjee, Ameet Kumar & Akhtaruzzaman, Md & Sensoy, Ahmet & Goodell, John W., 2024. "Volatility spillovers and hedging strategies between impact investing and agricultural commodities," International Review of Financial Analysis, Elsevier, vol. 94(C).
    3. Bouri, Elie & Alsagr, Naif, 2024. "Hedging investment-grade and high-yield bonds with credit VIX," Economics Letters, Elsevier, vol. 237(C).
    4. Patrick M. Parkinson, 1982. "Estimating the hedging effectiveness of Treasury bill futures: an alternative approach," International Finance Discussion Papers 196, Board of Governors of the Federal Reserve System (U.S.).
    5. Dale, Charles, 1991. "Economics of Energy Futures Markets," MPRA Paper 47447, University Library of Munich, Germany.
    6. Andrea L. DeMaskey, 1997. "Single and Multiple Portfolio Cross-Hedging with Currency Futures," Multinational Finance Journal, Multinational Finance Journal, vol. 1(1), pages 23-46, March.
    7. Hoberg, Gerard & Moon, S. Katie, 2017. "Offshore activities and financial vs operational hedging," Journal of Financial Economics, Elsevier, vol. 125(2), pages 217-244.
    8. Joanne Hill & Thomas Schneeweis, 1982. "The Hedging Effectiveness Of Foreign Currency Futures," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 5(1), pages 95-104, March.
    9. Atreya Chakraborty & John Barkoulas, 1999. "Dynamic futures hedging in currency markets," The European Journal of Finance, Taylor & Francis Journals, vol. 5(4), pages 299-314.
    10. Vignola, Anthony & Dale, Charles & Federal Reserve System, Federal Reserve Staffs, 1979. "Treasury/Federal Reserve Study of Treasury Futures Markets Volume II: A Study by the Staffs of the U.S. Treasury and Federal Reserve System," MPRA Paper 58897, University Library of Munich, Germany.
    11. Tareq Saeed & Elie Bouri & Dang Khoa Tran, 2020. "Hedging Strategies of Green Assets against Dirty Energy Assets," Energies, MDPI, vol. 13(12), pages 1-17, June.
    12. Torsten Ehlers & Elod Takáts, 2013. "Capital flow dynamics and FX intervention," BIS Papers chapters, in: Bank for International Settlements (ed.), Sovereign risk: a world without risk-free assets?, volume 73, pages 25-38, Bank for International Settlements.

    More about this item

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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