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Title:Liquidity constrained exporters: Trade and futures hedging PDF Logo
Authors:Broll, Udo
Wahl, Jack E.
Issue Date:2009
Series/Report no.:Dresden discussion paper series in economics 17/09
Abstract:We present a model of risk averse exporting firm subject to liquidity constraints. The firm enters an unbiased futuresmarket to hedge exchange rate risk and may not be able to satisfy high margin calls. Then the firm is forced toprematurely liquidate the futures position. We show that preferences and expectations become important for optimumexport and hedging decisions, i.e. separation theorem and full hedge theorem are violated. Furthermore, internationaltrade is affected, for only firms that have sufficient financial resources fully exploid gains from trade.
Subjects:liquidity constraint
trade
futures
hedging
JEL:D81
F23
F31
Document Type:Working Paper
Appears in Collections:Dresden Discussion Paper Series in Economics, Faculty of Business and Economics, TU Dresden

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