Foreign Currency Derivatives versus Foreign Currency Debt and the Hedging Premium

2017 ◽  
pp. 381-433
Author(s):  
Ephraim Clark ◽  
Amrit Judge
Keyword(s):  
Foreign Currency ◽  
Currency Derivatives ◽  
Foreign Currency Debt

Why hedge currency exposure with foreign currency debt?

2013 ◽  
Vol 26 (2) ◽  
pp. 258-289 ◽  
Author(s):  
Milagros Vivel‐Búa ◽  
Luis Otero‐González ◽  
Sara Fernández‐López ◽  
Pablo Durán‐Santomil
Keyword(s):  
Foreign Currency ◽  
Currency Exposure ◽  
Foreign Currency Debt

Real Exchange Rate Overvaluation and WTO Dispute Initiation in Developing Countries

2016 ◽  
Vol 70 (4) ◽  
pp. 797-821 ◽  
Author(s):  
Timm Betz ◽  
Andrew Kerner
Keyword(s):  
Developing Countries ◽  
Exchange Rate ◽  
Trade Policy ◽  
Foreign Currency ◽  
Real Exchange Rates ◽  
Trade Disputes ◽  
Trade Dispute ◽  
Competitive Disadvantage ◽  
Dispute Initiation ◽  
Foreign Currency Debt

AbstractWhy and when do developing countries file trade disputes at the World Trade Organization (WTO)? Although financial conditions have long been considered an important driver of trade policy, they have been largely absent from the literature on trade disputes. We argue that developing country governments bring more trade dispute to the WTO when overvalued real exchange rates put exporters at a competitive disadvantage. This dynamic is most prevalent in countries where large foreign currency debt burdens discourage nominal currency devaluations that would otherwise serve exporters’ interests. Our findings provide an explanation for differences in dispute participation rates among developing countries, and also suggest a new link between exchange rate regimes and trade policy.

Asymmetric Information and Corporate Risk Management by Using Foreign Currency Derivatives

2012 ◽  
Vol 15 (01) ◽  
pp. 1250004 ◽  
Author(s):  
Bingxuan Lin ◽  
Chen-Miao Lin
Keyword(s):  
Risk Management ◽  
Asymmetric Information ◽  
Information Asymmetry ◽  
Foreign Currency ◽  
Corporate Risk Management ◽  
Currency Derivatives ◽  
Medium Level ◽  
Low Levels ◽  
Corporate Risk ◽  
Very High

We examine how information asymmetry affects a firm's incentive to hedge versus speculate by using foreign currency derivatives. We find a quadratic relation between asymmetric information and a firm's risk management activities. In particular, we find that the firms facing medium level of information asymmetry are more likely to hedge, while firms with very high and low levels of asymmetric information tend to speculate. Moreover, we find that our results hold primary for firms operating in highly competitive industries.

scholarly journals Household Debt Revaluation and the Real Economy: Evidence from a Foreign Currency Debt Crisis

2020 ◽  
Vol 110 (9) ◽  
pp. 2667-2702 ◽  
Author(s):  
Emil Verner ◽  
Győző Gyöngyösi
Keyword(s):  
Foreign Currency ◽  
Debt Crisis ◽  
Spillover Effects ◽  
Household Debt ◽  
Sudden Increase ◽  
Real Economy ◽  
Balance Sheets ◽  
Default Rates ◽  
Foreign Currency Debt ◽  
The Impact

We examine the consequences of a sudden increase in household debt burdens by exploiting variation in exposure to household foreign currency debt during Hungary’s late-2008 currency crisis. The revaluation of debt burdens causes higher default rates and a collapse in spending. These responses lead to a worse local recession, driven by a decline in local demand, and negative spillover effects on nearby borrowers without foreign currency debt. The estimates translate into an output multiplier on higher debt service of 1.67. The impact of debt revaluation is particularly severe when foreign currency debt is concentrated on household, rather than firm, balance sheets. (JEL E21, E32, F34, G51)

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