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Article: International tenders and futures hedging

TitleInternational tenders and futures hedging
Authors
Issue Date2006
PublisherJohn Wiley & Sons Ltd. The Journal's web site is located at http://www3.interscience.wiley.com/cgi-bin/jhome/7976
Citation
Managerial And Decision Economics, 2006, v. 27 n. 7, p. 587-594 How to Cite?
AbstractThis paper examines the optimal bidding and hedging decisions of a risk-averse firm that takes part in an international tender. The firm faces multiple sources of uncertainty: exchange rate risk, risk of an unsuccessful tender, and business risk. The firm is allowed to trade unbiased currency futures contracts to imperfectly hedge its contingent foreign exchange risk exposure. We show that the firm shorts less (more) of the unbiased futures contracts when its marginal utility function is convex (concave) as compared with the case that the marginal utility function is linear. We further show that the curvature of the marginal utility function plays a decisive role in determining the impact of currency futures hedging on the firm's bidding behavior. Sufficient conditions that ensure the firm bids more or less aggressively than in the case without hedging opportunities are derived. Copyright © 2006 John Wiley & Sons, Ltd.
Persistent Identifierhttp://hdl.handle.net/10722/85637
ISSN
2015 SCImago Journal Rankings: 0.546
References

 

DC FieldValueLanguage
dc.contributor.authorLien, Den_HK
dc.contributor.authorWong, KPen_HK
dc.date.accessioned2010-09-06T09:07:27Z-
dc.date.available2010-09-06T09:07:27Z-
dc.date.issued2006en_HK
dc.identifier.citationManagerial And Decision Economics, 2006, v. 27 n. 7, p. 587-594en_HK
dc.identifier.issn0143-6570en_HK
dc.identifier.urihttp://hdl.handle.net/10722/85637-
dc.description.abstractThis paper examines the optimal bidding and hedging decisions of a risk-averse firm that takes part in an international tender. The firm faces multiple sources of uncertainty: exchange rate risk, risk of an unsuccessful tender, and business risk. The firm is allowed to trade unbiased currency futures contracts to imperfectly hedge its contingent foreign exchange risk exposure. We show that the firm shorts less (more) of the unbiased futures contracts when its marginal utility function is convex (concave) as compared with the case that the marginal utility function is linear. We further show that the curvature of the marginal utility function plays a decisive role in determining the impact of currency futures hedging on the firm's bidding behavior. Sufficient conditions that ensure the firm bids more or less aggressively than in the case without hedging opportunities are derived. Copyright © 2006 John Wiley & Sons, Ltd.en_HK
dc.languageengen_HK
dc.publisherJohn Wiley & Sons Ltd. The Journal's web site is located at http://www3.interscience.wiley.com/cgi-bin/jhome/7976en_HK
dc.relation.ispartofManagerial and Decision Economicsen_HK
dc.rightsManagerial and Decision Economics. Copyright © John Wiley & Sons Ltd.en_HK
dc.titleInternational tenders and futures hedgingen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0143-6570&volume=27&spage=587&epage=594&date=2006&atitle=International+Tenders+and+Futures+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.doi10.1002/mde.1276en_HK
dc.identifier.scopuseid_2-s2.0-33845262028en_HK
dc.identifier.hkuros134723en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-33845262028&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume27en_HK
dc.identifier.issue7en_HK
dc.identifier.spage587en_HK
dc.identifier.epage594en_HK
dc.publisher.placeUnited Kingdomen_HK
dc.identifier.scopusauthoridLien, D=7006094582en_HK
dc.identifier.scopusauthoridWong, KP=7404759417en_HK

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