Hedging Transaction Exposure Through Options and Money Markets: Empirical Findings
Abstract
This study compares the effectiveness of money market hedges and options hedges for both payables and receivables denominated in British pounds, German marks, Japanese yen and the Swiss franc. Data on interest rates, exchange rates, and options contracts were obtained from public sources for two recent time periods. This information was used to determine, for each currency: 1) the lowest rate of exchange for payables, and 2) the highest rate of exchange for receivables for each hedging technique. Unique “money market hedge exchange rate factors” and “options hedge exchange rate factors” were developed to facilitate comparisons between the two hedging techniques.
Keywords
Citation
Khazeh, K. and Winder, R.C. (2006), "Hedging Transaction Exposure Through Options and Money Markets: Empirical Findings", Multinational Business Review, Vol. 14 No. 1, pp. 79-92. https://doi.org/10.1108/1525383X200600005
Publisher
:Emerald Group Publishing Limited
Copyright © 2006, Emerald Group Publishing Limited