Trade and currency options hedging model

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摘要

This paper examines the trade and options hedging strategies for an exporting firm. We present a trade and currency options hedging model at the first place aiming to minimize the Conditional Value-at-Risk (CVaR). In the proposed model, a copula function is used to deduce the distribution function of the hedged portfolio. Then, according to the equivalent formulas of CVaR definition, we transform the proposed model into a simple structure by the equivalence transformation method. Finally, an empirical study of a gold exporting firm in China is conducted to illustrate the application of the proposed model. The results show that for an importing firm, to export the gold to a foreign country with currency options hedging is superior to that of selling the gold in the domestic market with or without currency options hedging. In particular, if the firm sells the gold only in the domestic market, it is suggested to be equipped with currency options hedging simultaneously. We analyze the sensitivities of the budget and the risk aversion degree, and find out that the optimal option contract is affected by the budget. In addition, the risk aversion degree of the decision maker has no effects on the optimal strike price. Since currency options hedging is conducive to decrease CVaR, the firm is thus suggested to increase the budget on options.

论文关键词:Currency options hedging,Exporting strategies,Copula functions,Equivalence transformation method

论文评审过程:Received 25 October 2017, Revised 24 April 2018, Available online 9 May 2018, Version of Record 26 May 2018.

论文官网地址:https://doi.org/10.1016/j.cam.2018.04.059