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...

We consider a monopolistic, risk-averse multinational firm which sells and produces at home and abroad under exchange rate uncertainty. First we show that the stochastic exchange rate implies higher production and lower sales in the foreign country. Then we analyze the impact of currency futures...

Purpose: We use a sample of 59 UK insurance companies to study the sensitivity of foreign exchange exposure, to the cash flow estimation method. This approach allows a decomposition of exposure into short- and long-term components. By revealing the nature of their cash flow exposures, companies...

We focus on the issue of currency management in the context of offshore investing with an emphasis on the selection of an appropriate currency hedge. It is shown that when seeking to minimize the risk associated with the Rand value of a foreign asset, the optimal currency hedge is strongly...