On the variation of hedging decisions in daily currency risk management
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|
Bos, C.S., Mahieu, R.J., & van Dijk, H.K.. (2000). On the variation of hedging decisions in daily currency risk management (No. EI 2000-20/A). Retrieved from http://hdl.handle.net/1765/1653