Optimal international hedging in commodity and currency forward markets

Simon Benninga*, Rafael Eldor, Itzhak Zilcha

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

52 Scopus citations


This paper derives optimal hedging and production rules for an exporting firm which faces both commodity-price and foreign- exchange-rate uncertainty. The size of the commodity hedge is independent of the properties of the foreign-exchange market. However, the optimal foreign-exchange hedge depends on the commodity hedge and the properties of the commodity forward market. The firm's production decision is independent of its objective function if both forward markets exist, but depends on the consumption beta of the unhedgeable risks in the absence of one or both of the markets.

Original languageEnglish
Pages (from-to)537-552
Number of pages16
JournalJournal of International Money and Finance
Issue number4
StatePublished - Dec 1985


FundersFunder number
David Horowitz Institute for the Research of Developing Countries


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