Imperfect Hedging and Export Production

Бролл, Удо; Wahl, Jack E.

doi:10.2307/1060886

Cited by 12 publications

(11 citation statements)

References 19 publications

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“…Analogously, we have F c > 0 for cov( p z) > 0. This is in line with a result from Broll and Wahl (1996) Loosely speaking, the motivation to speculate on the real risk premium is stronger than the motivation to cross hedge untradable in ation risk if risk aversion is small. Increasing expected real wealth is more attractive than reducing the variability o f r e a l w ealth via cross hedging.…”

Section: Optimal Forward Positions Under Independent In Ation Risksupporting

confidence: 87%

“…But if in ation risk is replaced by another independent and untradable multiplicative risk that only applies topq, Theorem 1 no longer holds. In that case, the forward position also depends on the individual's prudence in the sense of Kimball (1990) Broll and Wahl (1996) applied it to the problem of cross hedging exchange rate risk. However, in ation risk may require other speci cations of h(p).…”

Section: Optimal Forward Positions Under Independent In Ation Riskmentioning

confidence: 99%

“…Benninga et al (1985) and Adam-M uller (1997) consider the e ects of a second risk that is multiplicatively combined with only the tradable risk Adam-M uller (1993), and Franke et al (1998) consider an independent, additive background risk in initial wealth. Cross hedging is discussed by Anderson and Danthine (1981), Broll et al (1995), Broll and Wahl (1996) and others.…”

Section: Introductionmentioning

confidence: 99%

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Hedging price risk when real wealth matters

Adam-Müller

2000

Journal of International Money and Finance

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract This paper analyzes optimal hedging of a tradable risk (e.g. price risk or exchange rate risk) with forward contracts in the presence of untradable in ation risk. Utility i s d e n e d o ver real wealth. Optimal forward positions are derived relative t o a g i v en initial exposure in the tradable risk. A nominally unbiased forward market usually implies a non-zero real risk premium and hence some risk taking. If untradable in ation risk is a monotone function of the tradable risk plus noise, cross hedging and speculating on the real risk premium are con icting objectives the level of relative risk aversion determines which objective is dominant in a nominally unbiased forward market. Terms of use: Documents in EconStor may JEL classi cation: D81, G11, D11Keywords: hedging, forward market, untradable in ation risk, relative r i s k a version I would like to thank Marc De Ceuster, G unter Franke, Roland Jeske and Michael Kohlmann for helpful comments and discussions. Remaining errors are mine, of course.

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Section: Optimal Forward Positions Under Independent In Ation Risksupporting

confidence: 87%

Section: Optimal Forward Positions Under Independent In Ation Riskmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Hedging price risk when real wealth matters

Adam-Müller

2000

Journal of International Money and Finance

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“…1 The literature has employed many methodological approaches; although the estimated magnitudes differ across studies, the common result is that both variables affect export volumes at significant levels in the direction implied by the standard theory. Some of the prominent articles include: Krugman and Baldwin (1987); Hooper and Marquez (1993); Adams, Gangnes, and Shishido (1993); Afriyie and Kundu (1994); Wilson (1993); Lenz (1992); Broll and Wahl (1996); Sachs and Shatz (1994); Kim (1991), Hooper and Mann (1989), Bryant, Holtham, and Hooper (1988), Cline (1989), and Dornbush and Werner (1994).…”

Section: Introductionmentioning

confidence: 99%

Do Exchange Rates and Foreign Incomes Matter for Exports at the State Level?

Cronovich

Gazel

1998

Journal of Regional Science

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At the national level, trade-weighted real exchange rates and foreign incomes significantly impact exports. At the subnational level, these variables are generally insignificant in the few studies that include them. We argue that the standard use of national trade weights in the construction of subnational trade-weighted averages of exchange rates and foreign incomes is inappropriate, and we then construct these variables using state-specific trade weights. In our panel data analysis of state-level manufacturing exports, these variables enter significantly and with the expected signs. Also, their out-of-sample forecasting ability is significantly better than that of the national tradeweighted variables.

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“…In the last decade international firms have been exposed to high foreign exchange risk since major currencies have shown a substantial volatility. The volatility of foreign exchange rates is affecting international trade, foreign direct investments and hedging decisions (Cushman, 1988;Powers and Castelino, 1991;Broll, 1992;Viaene and De Vries, 1992;Dellas and Zilberfarb, 1993;Gagnon, 1993;Broll and Wahl, 1996). This paper studies some of the implications of a firm's export flexibility with regard to its production and hedging decisions.…”

Section: Introductionmentioning

confidence: 99%

Export Flexibility and Hedging

Бролл¹,

Wahl²

1997

Bulletin of Econ Res

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The paper considers a risk-averse international firm which sells its output in either the domestic or the foreign market. The firm possesses export flexibility, and so it can choose between the domestic and export markets after considering the foreign exchange rate. It is shown that a separation property holds if the proper hedging instrument is used: the firm's production depends on market prices and technology and does not depend on its attitude towards risk nor on its expectations. A full-hedge proposition is derived.

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Imperfect Hedging and Export Production

Cited by 12 publications

References 19 publications

Hedging price risk when real wealth matters

Hedging price risk when real wealth matters

Do Exchange Rates and Foreign Incomes Matter for Exports at the State Level?

Export Flexibility and Hedging

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