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| Tekijä: | Wong, K.P. |
| Otsikko: | Currency hedging with options and futures |
| Lehti: | European Economic Review
2003 : OCT, VOL. 47:5, p. 833-839 |
| Asiasana: | Monetary policy Futures markets Hedging Currency Options Risk |
| Kieli: | eng |
| Tiivistelmä: | This paper examines the optimal hedging decision of a competitive exporting firm facing concurrently hedgeable exchange rate risk and non-hedgeable price risk. It is shown that the hedging role of currency options is due to two distinct sources of non-linearity: 1. the multiplicative nature of the price and exchange rate risk, and 2. the marginal utility function of the firm. In particular, it is shown that a long put option position is optimal when the price risk is negatively correlated with the exchange rate risk and/or the firm is prudent. |
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