This paper uses a dynamic optimization model to estimate the welfare gains of hedging against commodity price risk for … commodity-exporting countries. We show that the introduction of hedging instruments such as futures and options enhances … domestic welfare through two channels. First, by reducing export income volatility and allowing for a smoother consumption path …

periods. Fast transport thus provides firms with a real option to smooth demand volatility. The model predicts that the … likelihood and extent to which firms employ air shipments is increasing in the volatility of demand they face, decreasing in the …

-return volatility increases with unused commitments, but the increase is smaller for banks with high levels of transactions deposits …

very simple hedging strategies can eliminate more than 80% of the bill volatility that would otherwise occur. Far from … significantly enhance their effect on reducing bill volatility …

observation, this paper highlights some of the desirable features of insurance and hedging instruments against capital flow … volatility, and discusses steps to facilitate the creation of these markets …

-at-risk constraints. The results also have strong implications for macro models where volatility affects investment decisions, suggesting …

risks. Portfolios hedging macro uncertainty have historically earned zero or even significantly positive returns, while … uncertainty. The results dictate the role of uncertainty and volatility in structural models and we show they are consistent with …