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Ex-ante hedging strategy selection using foreign-exchange-rate forecasting models

Article Abstract:

Hedging methodologies usually center on risk reduction rather than on expected returns. An emphasis on risk reduction, however, does not consider predicted price fluctuations. Ex-ante, or advance, hedging decision strategies applied to forecasts of foreign exchange prices are presented. The hedging decision strategies discussed are an improvement over models using variance-minimizing ratios.

Forecasting

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Hedging with synthetics, foreign-exchange forwards, and the export decision

Article Abstract:

The relationship between exchange rate risk and export and hedging decision of an international exporting firm is examined. Synthetic forward contract or the currency option contract as a hedging technique is studied in particular. Analysis indicate that the hedging technique is used only in instances when the risk premia of the the currency put and call options' prices are the same.

Currency options

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Hedge ratios under inherent risk reduction in a commodity complex: an interpretation

Article Abstract:

The Tzang-Leuthold (TL) approach is presented as an alternative multiple regression analysis. The traditional approach argues that traders experience multiple risks that simultaneously result in minimum risk hedge ratios for commodities connected through a relationship of fixed production. A soy bean processor is used to develop the TL model.

Economic aspects, Risk (Economics), Commodity futures, Regression analysis

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