Publication Date

2007

Document Type

Dissertation/Thesis

First Advisor

Jain, Neelam

Degree Name

Ph.D. (Doctor of Philosophy)

Department

Department of Economics

LCSH

Hedging (Finance)--Mathematical models

Abstract

Chang and Wong investigated the optimal hedging strategy for a multinational firm which has future cash flows in a foreign currency but is unable to directly hedge the exchange rate risk. The firm then uses a third currency to partially hedge the risk. This paper generalizes the paper of Chang and Wong by showing that some of the assumptions about the distributions of the stochastic process generating the exchange rates are more restrictive than necessary, i.e., that the same results hold under weaker assumptions. It then does specific calculations for the case of bivariate lognormal distributions and compares the results to those of Chang and Wong. Using the bivariate lognormal model with a term for inflation gives the best performance under a real-life data set.

Comments

Includes bibliographical references (pages [64]-65).

Extent

65 pages

Language

eng

Publisher

Northern Illinois University

Rights Statement

In Copyright

Rights Statement 2

NIU theses are protected by copyright. They may be viewed from Huskie Commons for any purpose, but reproduction or distribution in any format is prohibited without the written permission of the authors.

Media Type

Text

Share

COinS