Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/101742
Authors: 
Broll, Udo
Wong, Kit-Pong
Year of Publication: 
1997
Series/Report no.: 
Diskussionsbeiträge: Serie II, Sonderforschungsbereich 178 "Internationalisierung der Wirtschaft", Universität Konstanz 355
Abstract: 
The paper presents a model of a risk-averse exporting firm under exchange rate risk. We focus on the economic implications of basis risk. It is shown that the regression dependence assumptions between spot and futures exchange rates are essential in analyzing optimal hedging and export decisions. When the spot exchange rate and the futures exchange rate are imperfectly correlated we show that the firm adopts an over hedge when the exchange rate risk exposure is convex and an under hedge when the risk exposure is concave given the unbiasedness of the currency futures market.
Subjects: 
exchange rate risk
hedging
regression dependence
JEL: 
F21
F31
Document Type: 
Working Paper

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