Instruments of risk mitigation play an important role in managing country risk within the foreign direct investment (FDI) decision. Our study assesses country risk by state-dependent preferences and introduces futures contracts as a tool of risk mitigation. We show that country risk assessments...

Wir untersuchen für ein internationales Unternehmen das Zusammenwirken von finanz- und realwirtschaftlichem Risikomanagement. Dies geschieht auf der Grundlage eines intertemporalen, stochastischen Entscheidungsmodells. Die gemeinsame Betrachtung von Devisen-Futures und Lagerhaltung bestätigt...

Based upon the foundations of mean-variance decision-making theory, we demonstrate that a change in the risk situation of an international enterprise open currency position does not inevitably require a corresponding hedging accommodation. Given a new risk situation, whether a revision of the...

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...

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...

In this paper we consider a multinational firm under exchange rate risk in a multiperiod model. We analyze the impact of exchange rate uncertainty and the use of currency futures on the risk-averse firm's decisions about home and foreign production. Without any markets for hedging an increase in...

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...