Optimal Currency Hedging, Export, and Production in the Presence of Idiosyncratic Risk

Axel F. A. Adam-Müller

Swiss Journal of Economics and Statistics (SJES), 1993, vol. 129, issue II, 197-208

Abstract: This paper analyzes the behavior of a risk-averse exporting firm facing exchange rate uncertainty in the presence of forward markets. The existing literature on optimal hedging and production rules is extended by allowing for idiosyncratic risk. The paper provides an application of recent concepts in expected utility theory concerning optimal decisions in the presence of more than one risk (prudence, precautionary premium). Important results (separation theorem, full hedging theorem) still hold, but optimal speculative positions are smaller due to the existence of idiosyncratic risk.

Date: 1993
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sjes.ch/papers/1993-II-5.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ses:arsjes:1993-ii-5

Access Statistics for this article

Swiss Journal of Economics and Statistics (SJES) is currently edited by Marius Brülhart

More articles in Swiss Journal of Economics and Statistics (SJES) from Swiss Society of Economics and Statistics (SSES) Contact information at EDIRC.
Bibliographic data for series maintained by Kurt Schmidheiny ().