Multiple uncertainty, forward-futures markets and international trade

Jean-Marie Viaene and Itzhak Zilcha

No 255, Discussion Papers, Series II from University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy"

Abstract: The optimum behavior of a competitive risk-averse international trader who supplies or demands commodities invoiced in foreign currency is examined when his profits are subject to several forms of risk: production, domestic cost, the exchange rate and the commodity price. The focus of our study is the robustness of the known results regarding the role of forward-futures markets in the presence of cost and output uncertainty. New results on the implications of the framework for the separation and the double hedging theorems are derived. The behavior of the same firm with and without complete markets is compared and conditions are obtained for a domestic price guarantee or a gradual introduction of missing markets to promote the level of international trade.

Keywords: uncertainty; risk aversion; incomplete markets; forward rate; futures rate (search for similar items in EconPapers)
JEL-codes: D81 D84 F19 F31 (search for similar items in EconPapers)
Date: 1995
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Citations: View citations in EconPapers (6)

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Related works:
Working Paper: Multiple Uncertainty, Forward-Futures Markets and International Trade (1995)
Working Paper: Multiple Uncertainty, Forward-Futures Markets and International Trade (1995)
Working Paper: Multiple uncertainty, forward-futures markets and international trade (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kondp2:255

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