The effectiveness of hedging foreign exchange rate risk: an emerging market perspective
Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2013. === This study provides an analysis of the effectiveness of the foreign currency hedging abilities afforded by the futures market. Th...
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ndltd-netd.ac.za-oai-union.ndltd.org-wits-oai-wiredspace.wits.ac.za-10539-130532019-05-11T03:40:36Z The effectiveness of hedging foreign exchange rate risk: an emerging market perspective Ben-David, Tal Aaron Hedging Foreign exchange futures Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2013. This study provides an analysis of the effectiveness of the foreign currency hedging abilities afforded by the futures market. The focus is on the currencies of six emerging markets, namely; Brazil, India, Mexico, Russia, South Africa and Turkey. By examining emerging market currencies we can examine the effect that possible mispricing and lack of liquidity can have on hedging effectiveness. To this effect, this article uses the regression method, as allowed by the accounting standard FAS 133, to assess the effectiveness of futures contracts as a hedging mechanism for emerging market currencies. The methods follow previous studies such as Hill and Schneeweis (1982) which consider the length of the hedging horizon and time to expiration due to their effect on hedge effectiveness. Results indicate consistent hedge effectiveness in only South Africa and Turkey, with reasonable hedge effectiveness exhibited by Mexico and Russia. Sensible explanations are given for the extreme hedge ineffectiveness that can be seen in the Brazilian and Indian tests. 2013-08-21T09:19:38Z 2013-08-21T09:19:38Z 2013-08-21 Thesis http://hdl.handle.net/10539/13053 en application/pdf |
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Hedging Foreign exchange futures Ben-David, Tal Aaron The effectiveness of hedging foreign exchange rate risk: an emerging market perspective |
description |
Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2013. === This study provides an analysis of the effectiveness of the foreign currency hedging abilities
afforded by the futures market. The focus is on the currencies of six emerging markets,
namely; Brazil, India, Mexico, Russia, South Africa and Turkey. By examining emerging
market currencies we can examine the effect that possible mispricing and lack of liquidity can
have on hedging effectiveness. To this effect, this article uses the regression method, as
allowed by the accounting standard FAS 133, to assess the effectiveness of futures contracts
as a hedging mechanism for emerging market currencies. The methods follow previous
studies such as Hill and Schneeweis (1982) which consider the length of the hedging horizon
and time to expiration due to their effect on hedge effectiveness. Results indicate consistent
hedge effectiveness in only South Africa and Turkey, with reasonable hedge effectiveness
exhibited by Mexico and Russia. Sensible explanations are given for the extreme hedge
ineffectiveness that can be seen in the Brazilian and Indian tests. |
author |
Ben-David, Tal Aaron |
author_facet |
Ben-David, Tal Aaron |
author_sort |
Ben-David, Tal Aaron |
title |
The effectiveness of hedging foreign exchange rate risk: an emerging market perspective |
title_short |
The effectiveness of hedging foreign exchange rate risk: an emerging market perspective |
title_full |
The effectiveness of hedging foreign exchange rate risk: an emerging market perspective |
title_fullStr |
The effectiveness of hedging foreign exchange rate risk: an emerging market perspective |
title_full_unstemmed |
The effectiveness of hedging foreign exchange rate risk: an emerging market perspective |
title_sort |
effectiveness of hedging foreign exchange rate risk: an emerging market perspective |
publishDate |
2013 |
url |
http://hdl.handle.net/10539/13053 |
work_keys_str_mv |
AT bendavidtalaaron theeffectivenessofhedgingforeignexchangerateriskanemergingmarketperspective AT bendavidtalaaron effectivenessofhedgingforeignexchangerateriskanemergingmarketperspective |
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