The optimal multi-period hedging model of currency futures and options with exponential utility

2020 ◽  
Vol 366 ◽  
pp. 112412
Author(s):  
Xing Yu ◽  
Zhongkai Wan ◽  
Xiaowen Tu ◽  
Yanyin Li
Keyword(s):  
Exponential Utility ◽  
Currency Futures ◽  
Futures And Options

scholarly journals Dynamic Currency Futures and Options Hedging Model

2019 ◽  
Vol 2019 ◽  
pp. 1-11
Author(s):  
Xing Yu ◽  
Yanyin Li ◽  
Zhongkai Wan
Keyword(s):  
Optimization Method ◽  
Risk Exposure ◽  
Closed Form Solutions ◽  
Currency Futures ◽  
Dynamic Setting ◽  
Hedging Strategies ◽  
Competitive Firm ◽  
Futures And Options ◽  
Hedging Problem ◽  
Options Hedging

In this paper, we consider a risk averse competitive firm that adopts currency futures and options for hedging purpose. Based on the assumption of unbiased markets of currency futures and options, we propose the optimal hedging model in dynamic setting. By using two-stage optimization method, we prove that it is desirable for the prudent enterprise to buy exchange rate options to hedge currency risk. Furthermore, we derive the closed-form solutions of the multiperiod hedging problem with the quadratic utility function. We investigate an empirical study incorporated into GARCH-t prediction on the efficiency of hedging with currency futures and options. The empirical results demonstrate that hedging with currency futures and options can reduce the silver export firm’s risk exposure. Profits and the effective boundaries are compared in three cases: hedging with futures and options synchronously, only with futures and without any hedge. The results of multiple comparisons among different hedging strategies show that hedging with linear and nonlinear derivatives is advisable for the export firm.

scholarly journals Important Aspects Related To Foreign Exchange Operations Of Commercial Banks

2021 ◽  
Vol 03 (04) ◽  
pp. 157-165
Author(s):  
Normet Saparboyevich Ernazarov ◽  
◽  
Oybek Odilovich Xudoyorov ◽  
Keyword(s):  
Foreign Exchange ◽  
Commercial Banks ◽  
Balance Sheet ◽  
Econometric Analysis ◽  
Currency Futures ◽  
Factors Influencing ◽  
Futures And Options ◽  
Letters Of Credit ◽  
The Republic

This article provides analytical, critical and econometric analysis of the factors influencing the off-balance sheet operations of commercial banks of the Republic of Uzbekistan. Factors influencing documentary letters of credit, currency forward transactions, bank guarantee-related transactions, currency spot, currency futures and options from off-balance sheet operations, which are highly profitable for commercial banks, were studied.

The Russian ruble crisis of December 2014

2016 ◽  
pp. 66-86
Author(s):  
A. Obizhaeva
Keyword(s):  
Microstructure Analysis ◽  
Future Market ◽  
Effective Response ◽  
Large Order ◽  
Short Period ◽  
The Face ◽  
Front Running ◽  
Futures And Options

The paper presents a microstructure analysis of the crash of the Russian ruble in mid-December 2014. The author shows that the market break probably happened due to the execution of a large order that converted Russian rubles into U.S. dollars over a short period of a few days. Expirations of futures and options as well as possible front-running could have exacerbated the collapse of the Russian currency. The paper discusses measures taken by the Moscow Exchange and Bank of Russia during the episode and makes several recommendations to prevent a repetition of the similar events and provide an effective response in the face of future market breaks.

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