TY - JOUR
T1 - Hedging exchange rate risk
T2 - The multiperiod case
AU - Broll, Udo
AU - Wahl, Jack E.
AU - Zilcha, Itzhak
N1 - Funding Information:
We would like to thank two anonymous referees and Professor Marco Pagano for helpful comments and advice which resulted in significant improvement of the paper. The research was supported by the Deutsche Forschungsgemeinschaft (SFB 178, University of Konstanz).
PY - 1999/12
Y1 - 1999/12
N2 - We analyse production and hedging in a multiperiod framework for a risk-averse exporting firm facing a random exchange rate. We extend the separation theorem to this multiperiod model. Our study shows that unbiased currency forward markets in all periods do not imply standard full hedging. Under some conditions, the firm tends to overhedge compared to the one-period hedging models.
AB - We analyse production and hedging in a multiperiod framework for a risk-averse exporting firm facing a random exchange rate. We extend the separation theorem to this multiperiod model. Our study shows that unbiased currency forward markets in all periods do not imply standard full hedging. Under some conditions, the firm tends to overhedge compared to the one-period hedging models.
KW - Exchange rate risk, production, forward markets, multiperiod hedging.
UR - http://www.scopus.com/inward/record.url?scp=0041959054&partnerID=8YFLogxK
U2 - 10.1006/reec.1999.0206
DO - 10.1006/reec.1999.0206
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AN - SCOPUS:0041959054
SN - 1090-9443
VL - 53
SP - 365
EP - 380
JO - Research in Economics
JF - Research in Economics
IS - 4
ER -