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Frontiers in Finance and Economics is a UGC APPROVED International Journal of Research

Hedging of Exchange Rate Risk: A Note

Udo Broll, Stefan Schubert
Using a risk management framework, a model is presented in which currency futures markets for a less common currency, in which exports are invoiced, does not exist. However, the exporting firm can cross-hedge by using future contracts of other countries’ currencies correlated to the spot exchange rate in question. The main purpose of the study is to show the effectiveness of an optimal cross-hedge strategy of an international firm.
Keywords: exchange rate risk, currency futures markets, cross-hedge.
JEL Classification : F21, F31
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