This paper presents a model of a competitive risk-averse exporting firm under exchange rate risk. We show that export and hedging decisions can be separated if futures and currency options are available. A full hedge of uncertain export revenue occurs if the futures market is unbiased and the...

International joint ventures (JV) are popular institutional forms chosen by the less developed countries (LDCs) to attract foreign Investments. In this paper we describe a set up where a multinational firm (MNF) decides on the volume of investment and the LDC gov-ernment offers a package...

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...

We derive a class of utility functions that are equivalent with respect to a well-defined functional form. We apply a general view of constant relative risk aversion to investigate on different equivalence relations. Then we compare our results with standard applications in economics and finance.

We study the impact of exchange rate risk on an exporting firm in a developing country when there is no forward market in the foreign currency. However there exists a forward traded asset in this country the price of which is highly correlated to the foreign currency. By indirectly hedging its...

The paper derives optimal cross hedging and production rules for an exporting firm which faces multiple exchange rate risks. We study the impact of currency cross hedging upon the firm's export production for two countries. We demonstrate that when the forward market for cross hedging is...

In a framework for risk management a model of an international firm under exchange rate uncertainty is discussed. The firm can cross-hedge the exchange rate risk by using forwards of other country's currencies correlated to the spot exchange rate in question. The study investigates the...

This paper constructs an intertemporal model of the spot and forward markets for foreign exchange and shows that in equilibrium the forward market is unbiased, i.e., the forward rate is equal to the expected spot rate which will prevail in the market next period. This holds true as long as the...

In this paper we consider a risk averse multinational firm under exchange rate risk. We analyze the impact of exchange rate risk and of the use of currency forwards upon the firm's global market decisions with respect to international firm-specific capital allocation and direct foreign...