Information value, export and hedging

Udo Broll and Bernhard Eckwert

No 03/11, Dresden Discussion Paper Series in Economics from Technische Universität Dresden, Faculty of Business and Economics, Department of Economics

Abstract: The paper analyzes the interactions between the precision of information, trade and welfare within a decision framework of an exporting firm. Information in a financial market is described in terms of a publicly observable signal. With higher transparency, the signal conveys more precise information about the random foreign exchange rate. More precise information about exchange rate changes has ambiguous effects on trade and welfare which depend critically on technology of the firm and the degree of risk aversion.

Keywords: exchange rate risk; trade; futures market; market transparency; value of information (search for similar items in EconPapers)
JEL-codes: F11 F23 G14 G15 (search for similar items in EconPapers)
Date: 2011
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:tuddps:0311

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