International investment with exchange rate risk

Chen Fei, Weiyin Fei, Yayun Rui and Litan Yan

Asia-Pacific Journal of Accounting & Economics, 2021, vol. 28, issue 2, 225-241

Abstract: This paper developed an optimal intertemporal asset allocation strategy of a multinational corporation, which invests in foreign market under exchange rate risk. First, through Itô formula, the international investor’s wealth dynamics denominated in domestic currency is obtained. Then, to maximize the expected utility of the intertemporal consumption and the terminal wealth, the optimal consumption and investment strategies are obtained through the Hamilton-Jacobi-Bellman (HJB) equation. Finally, based on the numerical simulations, we provide an analysis of the impact of varying the relative risk aversion, the investment horizon and the exchange rate volatility on the optimal investment strategies of the investor.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/16081625.2019.1569539 (text/html)
Access to full text is restricted to subscribers.

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:taf:raaexx:v:28:y:2021:i:2:p:225-241

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/raae20

DOI: 10.1080/16081625.2019.1569539

Access Statistics for this article

Asia-Pacific Journal of Accounting & Economics is currently edited by Yin-Wong Cheung, Hong Hwang, Jeong-Bon Kim, Shu-Hsing Li and Suresh Radhakrishnan

More articles in Asia-Pacific Journal of Accounting & Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().