The term structure of currency hedge ratios

Many firms face product price risk in foreign currency, uncertain costs in home currency and exchange rate risk. If prices and exchange rates in different countries interact, natural hedges of foreign exchange risk might result. If the effectiveness of such hedges depends on the hedge horizon, they might affect a firm's usage of foreign exchange derivatives and lead to a term structure of optimal hedge ratios. We analyze this issue by deriving the variance minimizing hedge position in currency forward contracts of an exporting firm that is exposed to different risks. In an empirical study, we quantify the term structure of hedge ratios for a ' typical ' German firm that is exporting either to the United States, the United Kingdom or Japan. Based on cointegrated vector autoregressive models of prices, interest rates and exchange rates, we show that the hedge ratio decreases substantially with the hedge horizon, reaching values of one half or less for a ten-years horizon. Our findings can (partly) explain the severe underhedging of long-term exchange rate exposures that is frequently observed and have important implications for the design of risk management strategies. --corporate risk management,foreign exchange risk,hedging,cointegrated VAR model

THE TERM STRUCTURE OF CURRENCY HEDGE RATIOS

This paper investigates the variance minimizing currency forward hedge of an exporting firm that is exposed to different sources of risk. In an empirical study, we quantify the corresponding hedge ratios of a "typical" German firm for different hedge horizons. Based on cointegrated vector autoregressive models of prices, interest rates and exchange rates, we show that hedge ratios decrease substantially with the hedge horizon for different currencies, reaching values of one half or less for a ten-years horizon. Our findings can partly explain underhedging of long-term exchange rate exposures and have important implications for the design of risk management strategies.Corporate risk management, foreign exchange risk, hedging, cointegrated VAR model

Etude de la variation de quelques parametres physico-chimiques et lipidiques de divers cultivars d'avocats au cours du developpement physiologique du fruit

CNRS T 60035 / INIST-CNRS - Institut de l'Information Scientifique et TechniqueSIGLEFRFranc