File Download

There are no files associated with this item.

  Links for fulltext
     (May Require Subscription)
Supplementary

Article: Export and Hedging Decisions under Correlated Revenue and Exchange Rate Risk

TitleExport and Hedging Decisions under Correlated Revenue and Exchange Rate Risk
Authors
Issue Date2015
PublisherWiley. The Journal's web site is located at http://www.blackwellpublishing.com/journals/BOER
Citation
Bulletin of Economic Research, 2015, v. 67, p. 371-381 How to Cite?
AbstractThis paper examines the behavior of a competitive exporting firm under joint revenue and exchange rate risk. The firm can trade unbiased currency futures contracts for hedging purposes. We show that neither the separation theorem nor the full-hedging theorem holds when the revenue shock prevails. If the correlation between the revenue shock and the random spot exchange rate is non-positive, the firm optimally produces less than the benchmark level when the revenue shock is absent. If, in addition, the firm is prudent, the optimal futures position is an under-hedge. Finally, we derive sufficient conditions under which the firm's optimal output level is higher in the presence than in the absence of the revenue shock. Operational hedging and financial hedging as such interact in a complicated way to better cope with the multiple sources of uncertainty faced by the firm.
Persistent Identifierhttp://hdl.handle.net/10722/220230

 

DC FieldValueLanguage
dc.contributor.authorWong, KP-
dc.date.accessioned2015-10-16T06:33:11Z-
dc.date.available2015-10-16T06:33:11Z-
dc.date.issued2015-
dc.identifier.citationBulletin of Economic Research, 2015, v. 67, p. 371-381-
dc.identifier.urihttp://hdl.handle.net/10722/220230-
dc.description.abstractThis paper examines the behavior of a competitive exporting firm under joint revenue and exchange rate risk. The firm can trade unbiased currency futures contracts for hedging purposes. We show that neither the separation theorem nor the full-hedging theorem holds when the revenue shock prevails. If the correlation between the revenue shock and the random spot exchange rate is non-positive, the firm optimally produces less than the benchmark level when the revenue shock is absent. If, in addition, the firm is prudent, the optimal futures position is an under-hedge. Finally, we derive sufficient conditions under which the firm's optimal output level is higher in the presence than in the absence of the revenue shock. Operational hedging and financial hedging as such interact in a complicated way to better cope with the multiple sources of uncertainty faced by the firm.-
dc.languageeng-
dc.publisherWiley. The Journal's web site is located at http://www.blackwellpublishing.com/journals/BOER-
dc.relation.ispartofBulletin of Economic Research-
dc.rightsPreprint This is the pre-peer reviewed version of the following article: [FULL CITE], which has been published in final form at [Link to final article]. Authors are not required to remove preprints posted prior to acceptance of the submitted version. Postprint This is the accepted version of the following article: [full citation], which has been published in final form at [Link to final article]. In addition, authors may also transmit, print and share copies with colleagues, provided that there is no systematic distribution of the submitted version, e.g. posting on a listserve, network or automated delivery. -
dc.titleExport and Hedging Decisions under Correlated Revenue and Exchange Rate Risk-
dc.typeArticle-
dc.identifier.emailWong, KP: kpwongc@hkucc.hku.hk-
dc.identifier.authorityWong, KP=rp01112-
dc.identifier.doi10.1111/boer.12016-
dc.identifier.hkuros255816-
dc.identifier.volume67-
dc.identifier.spage371-
dc.identifier.epage381-

Export via OAI-PMH Interface in XML Formats


OR


Export to Other Non-XML Formats