On the variation of hedging decisions in daily currency risk management

Charles Bos, Ronald Mahieu and Herman van Dijk

No EI 2000-20/A, Econometric Institute Research Papers from Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute

Abstract: Internationally operating firms naturally face the decision whether or not to hedge the currency risk implied by foreign investments. In a recent paper, Bos, Mahieu and van Dijk evaluate the returns from optimal and alternative currency hedging strategies, for a series of 7 models, using Bayesian inference and decision analysis. The models differ in the way time-varying means, variances or the unconditional error distributions are incorporated. In this extension, we compare the hedging decisions and financial returns and utilities as they result from the modelling assumptions and the attitudes towards risk.

Keywords: Bayesian analysis; Exchange rates; Risk management (search for similar items in EconPapers)
Date: 2000-11-09
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Citations: View citations in EconPapers (2)

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Working Paper: On the Variation of Hedging Decisions in Daily Currency Risk Management (2001)
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