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Article: Hedging with mismatched currencies

TitleHedging with mismatched currencies
Authors
Issue Date1999
PublisherJohn Wiley & Sons, Inc. The Journal's web site is located at http://www.interscience.wiley.com/jpages/0270-7314/
Citation
Journal Of Futures Markets, 1999, v. 19 n. 8, p. 859-875 How to Cite?
AbstractThis article presents a model of a risk-averse multinational firm facing risk exposure to a foreign currency cash flow. Forward markets do not exist between the firm's own currency and the foreign currency, but do exist for a third currency. Because a triangular parity condition holds among these three currencies, the available forward markets, albeit incomplete, provide a useful avenue for the firm to indirectly hedge against its foreign exchange rate risk exposure. This article offers analytical insights into the optimal cross-hedging strategies of the firm. In particular, the results show that separate unbiasedness of the forward markets does not necessarily imply a perfect full hedge that eliminates the entire foreign exchange rate risk exposure of the firm. The optimal cross-hedging strategies depend largely on the firm's marginal utility function and on the correlation of the random spot exchange rates. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 859-875, 1999.
Persistent Identifierhttp://hdl.handle.net/10722/85644
ISSN
2015 Impact Factor: 0.698
2015 SCImago Journal Rankings: 0.520
References

 

DC FieldValueLanguage
dc.contributor.authorBroll, Uen_HK
dc.contributor.authorWong, KPen_HK
dc.date.accessioned2010-09-06T09:07:32Z-
dc.date.available2010-09-06T09:07:32Z-
dc.date.issued1999en_HK
dc.identifier.citationJournal Of Futures Markets, 1999, v. 19 n. 8, p. 859-875en_HK
dc.identifier.issn0270-7314en_HK
dc.identifier.urihttp://hdl.handle.net/10722/85644-
dc.description.abstractThis article presents a model of a risk-averse multinational firm facing risk exposure to a foreign currency cash flow. Forward markets do not exist between the firm's own currency and the foreign currency, but do exist for a third currency. Because a triangular parity condition holds among these three currencies, the available forward markets, albeit incomplete, provide a useful avenue for the firm to indirectly hedge against its foreign exchange rate risk exposure. This article offers analytical insights into the optimal cross-hedging strategies of the firm. In particular, the results show that separate unbiasedness of the forward markets does not necessarily imply a perfect full hedge that eliminates the entire foreign exchange rate risk exposure of the firm. The optimal cross-hedging strategies depend largely on the firm's marginal utility function and on the correlation of the random spot exchange rates. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 859-875, 1999.en_HK
dc.languageengen_HK
dc.publisherJohn Wiley & Sons, Inc. The Journal's web site is located at http://www.interscience.wiley.com/jpages/0270-7314/en_HK
dc.relation.ispartofJournal of Futures Marketsen_HK
dc.rightsThe Journal of Futures Markets. Copyright © John Wiley & Sons, Inc.en_HK
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.titleHedging with mismatched currenciesen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0270-7314&volume=19&spage=859&epage=875&date=1999&atitle=Hedging+with+Mismatched+Currenciesen_HK
dc.identifier.emailWong, KP: kpwongc@hkucc.hku.hken_HK
dc.identifier.authorityWong, KP=rp01112en_HK
dc.description.naturepostprint-
dc.identifier.doi10.1002/(SICI)1096-9934(199912)19:8<859::AID-FUT1>3.0.CO;2-A-
dc.identifier.scopuseid_2-s2.0-0005177178en_HK
dc.identifier.hkuros52573en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-0005177178&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume19en_HK
dc.identifier.issue8en_HK
dc.identifier.spage859en_HK
dc.identifier.epage875en_HK
dc.publisher.placeUnited Statesen_HK
dc.identifier.scopusauthoridBroll, U=7004024398en_HK
dc.identifier.scopusauthoridWong, KP=7404759417en_HK

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