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Transparency in the banking sector
Broll, Udo; Eckwert, Bernhard; Eickhoff, Andreas - 2011
The paper revisits the impact of uncertainty on the decision problem of a bank. The bank extends risky loans to private investors and sells deposits to savers at fixed rates. The uncertainty under which deposit/loan-portfolios are chosen by banks is endogenized through an information system that...
Persistent link: https://www.econbiz.de/10009425842
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Strategic Pricing of Financial Options
Bieta, Volker - 2010
need an approach explaining interdependent actions. Game theory is in a position to offer proper solutions. This paper …
Persistent link: https://www.econbiz.de/10013148045
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Export and benefits of hedging in emerging economies
Broll, Udo; Wahl, Jack E.; Wessel, Christoph - 2009
We study the impact of exchange rate risk upon export production within an emerging economy lacking in currency forward markets. However there exists a financial asset whose price is correlated with the relevant foreign currency. We present conditions under which export production is stimulated...
Persistent link: https://www.econbiz.de/10003867523
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Spatial allocation of capital : the role of risk preferences
Broll, Udo; Roldán-Ponce, Antoni; Wahl, Jack E. - 2010
This paper considers a model of spatial allocation of investment capital under uncertainty. We demonstrate that the spatial concentration of economic activity depends upon properties of risk preferences deeper than risk aversion. The degree of so-called relative prudence unambiguously decides...
Persistent link: https://www.econbiz.de/10003971025
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The firm under uncertainty : capital structure and background risk
Broll, Udo; Wong, Keith K.P. - 2010
This paper examines the interplay between the real and financial decisions of the competitive firm under output price uncertainty. The firm faces additional sources of uncertainty that are aggregated into a background risk. We show that the firm always chooses its optimal debt-equity ratio to...
Persistent link: https://www.econbiz.de/10003971039
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Prospect theory and hedging risks
Broll, Udo; Egozcue, Martín; Wong, Wing Keung; … - 2010
The prospect theory is one of the most popular decision-making theories. It is based on the S-shaped utility function …, unlike the von Neumann and Morgenstern (NM) theory, which is based on the concave utility function. The S-shape brings in … mathematical challenges: simple extensions and generalizations of NM theory into the prospect theory cannot be frequently achieved …
Persistent link: https://www.econbiz.de/10003980000
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Liquidity constrained exporters : trade and futures hedging
Broll, Udo; Wahl, Jack E. - 2009
We present a model of risk averse exporting firm subject to liquidity constraints. The firm enters an unbiased futuresmarket to hedge exchange rate risk and may not be able to satisfy high margin calls. Then the firm is forced toprematurely liquidate the futures position. We show that...
Persistent link: https://www.econbiz.de/10003941169
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Cross-hedging of correlated exchange rates
Broll, Udo; Kit, Pong Wong - 2011
This paper examines the behavior of a competitive exporting firm that exports to two foreign countries under multiple sources of exchange rate uncertainty. The firm has to cross-hedge its exchange rate risk exposure because there is only a forward market between the domestic currency and one...
Persistent link: https://www.econbiz.de/10009310879
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Ambiguity and the incentive to export
Broll, Udo; Kit, Pong Wong - 2014
This paper examines the optimal production and export decisions of an international firm facing exchange rate uncertainty when the firm's preferences exhibit smooth ambiguity aversion. Ambiguity is modeled by a second-order probability distribution that captures the firm's uncertainty about...
Persistent link: https://www.econbiz.de/10011521686
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The impact of inflation risk on forward trading and production
Broll, Udo; Kit, Pong Wong - 2014
This note examines the behavior of a competitive firm that faces joint price and inflation risk. Given that the price risk is negatively correlated with the inflation risk in the sense of expectation dependence, the firm optimally opts for an overhedge if the firm's coefficient of relative risk...
Persistent link: https://www.econbiz.de/10011521691