Discrete exchange rate hedging strategies

Article Abstract:

Five alternative hedging strategies are examined in terms of their impact on the variance of the terminal value of the firm. These strategies are unchanged location and unhedged cash flows; changing location and unhedged cash flows; changing location and hedging of the next period's cash flow; changing location and fixed hedging at the start of period 0; and changing location, fixed hedging of revenues and one period rolling hedge of costs. Findings demonstrate that popular strategies, such as one-period cash flow hedges and long-term fixed hedges, leave companies very vulnerable to currency risk.

Hedging (Finance)

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Testing for long horizon UIP using using PP-based exchange rate expectations

Article Abstract:

This paper supplements the subject of uncovered interest parity relation focusing on long instead of short-term interest rates and employs exchange rate expectations derived from purchasing power parity.

Netherlands, Interest Rates, Statistical Data Included, Purchasing power

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Does the Fed beat the foreign-exchange market?

Article Abstract:

An estimate and test of Fed intervention profits is adjusted for foreign-exchange risk.

Finance, Central banks

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