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Article: Export and strategic currency hedging

TitleExport and strategic currency hedging
Authors
KeywordsCommitment
Exchange rate uncertainty
Exports
Hedging
Issue Date2009
PublisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=0923-7992
Citation
Open Economies Review, 2009, v. 20 n. 5, p. 717-732 How to Cite?
AbstractThis paper examines an international Cournot duopoly wherein a home firm and a foreign firm compete in the home market under exchange rate uncertainty. The foreign exporting firm, being risk averse, has incentives to hedge its exchange rate risk exposure. In a two-stage setting, we show that hedging via an unbiased currency futures market acts as a strategic device. In particular, under either constant or decreasing absolute risk aversion, an increase in the hedging volume of the foreign firm promotes its exports and deters the home firm's output. In contrast to the well-known full-hedging result in a perfectly competitive environment, we find that the foreign firm over-hedges for strategic reasons. Furthermore, the separation result from the hedging literature under perfect competition no longer holds in our duopoly framework, i.e., equilibrium output levels depend on the risk attitude of the foreign firm as well as the probability distribution of the spot exchange rate. © Springer Science+Business Media, LLC 2008.
Persistent Identifierhttp://hdl.handle.net/10722/85592
ISSN
2015 Impact Factor: 0.772
2015 SCImago Journal Rankings: 0.531
ISI Accession Number ID
References

 

DC FieldValueLanguage
dc.contributor.authorBroll, Uen_HK
dc.contributor.authorWelzel, Pen_HK
dc.contributor.authorWong, KPen_HK
dc.date.accessioned2010-09-06T09:06:56Z-
dc.date.available2010-09-06T09:06:56Z-
dc.date.issued2009en_HK
dc.identifier.citationOpen Economies Review, 2009, v. 20 n. 5, p. 717-732en_HK
dc.identifier.issn0923-7992en_HK
dc.identifier.urihttp://hdl.handle.net/10722/85592-
dc.description.abstractThis paper examines an international Cournot duopoly wherein a home firm and a foreign firm compete in the home market under exchange rate uncertainty. The foreign exporting firm, being risk averse, has incentives to hedge its exchange rate risk exposure. In a two-stage setting, we show that hedging via an unbiased currency futures market acts as a strategic device. In particular, under either constant or decreasing absolute risk aversion, an increase in the hedging volume of the foreign firm promotes its exports and deters the home firm's output. In contrast to the well-known full-hedging result in a perfectly competitive environment, we find that the foreign firm over-hedges for strategic reasons. Furthermore, the separation result from the hedging literature under perfect competition no longer holds in our duopoly framework, i.e., equilibrium output levels depend on the risk attitude of the foreign firm as well as the probability distribution of the spot exchange rate. © Springer Science+Business Media, LLC 2008.en_HK
dc.languageengen_HK
dc.publisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=0923-7992en_HK
dc.relation.ispartofOpen Economies Reviewen_HK
dc.rightsThe original publication is available at www.springerlink.com-
dc.subjectCommitmenten_HK
dc.subjectExchange rate uncertaintyen_HK
dc.subjectExportsen_HK
dc.subjectHedgingen_HK
dc.titleExport and strategic currency hedgingen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0923-7992&volume=20&issue=5&spage=717&epage=732&date=2009&atitle=Export+and+strategic+currency+hedgingen_HK
dc.identifier.emailWong, KP: kpwongc@hkucc.hku.hken_HK
dc.identifier.authorityWong, KP=rp01112en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1007/s11079-008-9080-xen_HK
dc.identifier.scopuseid_2-s2.0-70350055157en_HK
dc.identifier.hkuros167738en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-70350055157&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume20en_HK
dc.identifier.issue5en_HK
dc.identifier.spage717en_HK
dc.identifier.epage732en_HK
dc.identifier.isiWOS:000270649400006-
dc.publisher.placeUnited Statesen_HK
dc.identifier.scopusauthoridBroll, U=7004024398en_HK
dc.identifier.scopusauthoridWelzel, P=36730569300en_HK
dc.identifier.scopusauthoridWong, KP=7404759417en_HK

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