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Article: Cross-hedging with currency options and futures

TitleCross-hedging with currency options and futures
Authors
Issue Date2003
PublisherCambridge University Press. The Journal's web site is located at http://journals.cambridge.org/action/displayJournal?jid=jfq
Citation
Journal of Financial and Quantitative Analysis, 2003, v. 38 n. 3, p. 555-574 How to Cite?
AbstractThis paper develops an expected utility model of a multinational firm facing exchange rate risk exposure to a foreign currency cash flow. Currency derivative markets do not exist between the domestic and foreign currencies. There are, however, currency futures and options markets between the domestic currency and a third currency to which the firm has access. Since a triangular parity condition holds among these three currencies, the available, yet incomplete, currency futures and options markets still provide a useful avenue for the firm to indirectly hedge against its foreign exchange risk exposure. This paper offers analytical insights into the optimal cross-hedging strategies of the firm. In particular, the results show the optimality of using options in conjunction with futures in the case of currency mismatching, even though cash flows appear to be linear.
Persistent Identifierhttp://hdl.handle.net/10722/85573
ISSN
2015 Impact Factor: 1.628
2015 SCImago Journal Rankings: 2.998
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorChang, ECen_HK
dc.contributor.authorWong, KPen_HK
dc.date.accessioned2010-09-06T09:06:44Z-
dc.date.available2010-09-06T09:06:44Z-
dc.date.issued2003en_HK
dc.identifier.citationJournal of Financial and Quantitative Analysis, 2003, v. 38 n. 3, p. 555-574en_HK
dc.identifier.issn0022-1090en_HK
dc.identifier.urihttp://hdl.handle.net/10722/85573-
dc.description.abstractThis paper develops an expected utility model of a multinational firm facing exchange rate risk exposure to a foreign currency cash flow. Currency derivative markets do not exist between the domestic and foreign currencies. There are, however, currency futures and options markets between the domestic currency and a third currency to which the firm has access. Since a triangular parity condition holds among these three currencies, the available, yet incomplete, currency futures and options markets still provide a useful avenue for the firm to indirectly hedge against its foreign exchange risk exposure. This paper offers analytical insights into the optimal cross-hedging strategies of the firm. In particular, the results show the optimality of using options in conjunction with futures in the case of currency mismatching, even though cash flows appear to be linear.en_HK
dc.languageengen_HK
dc.publisherCambridge University Press. The Journal's web site is located at http://journals.cambridge.org/action/displayJournal?jid=jfqen_HK
dc.relation.ispartofJournal of Financial and Quantitative Analysisen_HK
dc.rightsJournal of Financial and Quantitative Analysis. Copyright © Cambridge University Press.-
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.titleCross-hedging with currency options and futuresen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0022-1090&volume=38 No3&spage=555&epage=574&date=2003&atitle=Cross-Hedging+with+Currency+Options+and+Futuresen_HK
dc.identifier.emailChang, EC: ecchang@business.hku.hken_HK
dc.identifier.emailWong, KP: kpwong@econ.hku.hken_HK
dc.identifier.authorityChang, EC=rp01050en_HK
dc.identifier.authorityWong, KP=rp01112en_HK
dc.description.naturepublished_or_final_version-
dc.identifier.doi10.2307/4126731-
dc.identifier.scopuseid_2-s2.0-0141797532en_HK
dc.identifier.hkuros92014en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-0141797532&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume38en_HK
dc.identifier.issue3en_HK
dc.identifier.spage555en_HK
dc.identifier.epage574en_HK
dc.identifier.isiWOS:000185030300004-
dc.publisher.placeUnited Kingdomen_HK
dc.identifier.scopusauthoridWong, KP=7404759417en_HK
dc.identifier.scopusauthoridChang, EC=7401837661en_HK

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