✦ LIBER ✦

International tenders and futures hedging

✍ Scribed by Donald Lien; Kit Pong Wong

Publisher: John Wiley and Sons
Year: 2006
Tongue: English
Weight: 139 KB
Volume: 27
Category: Article
ISSN: 0143-6570
DOI: 10.1002/mde.1276

No coin nor oath required. For personal study only.

✦ Synopsis

This paper examines the optimal bidding and hedging decisions of a risk-averse firm that takes part in an international tender. The firm faces multiple sources of uncertainty: exchange rate risk, risk of an unsuccessful tender, and business risk. The firm is allowed to trade unbiased currency futures contracts to imperfectly hedge its contingent foreign exchange risk exposure. We show that the firm shorts less (more) of the unbiased futures contracts when its marginal utility function is convex (concave) as compared with the case that the marginal utility function is linear. We further show that the curvature of the marginal utility function plays a decisive role in determining the impact of currency futures hedging on the firm's bidding behavior. Sufficient conditions that ensure the firm bids more or less aggressively than in the case without hedging opportunities are derived.

📜 SIMILAR VOLUMES

Liquidity and hedging effectiveness unde

Liquidity and hedging effectiveness under futures mispricing: International evidence

✍ A. Andani; J. A. Lafuente; A. Novales 📂 Article 📅 2009 🏛 John Wiley and Sons 🌐 English ⚖ 165 KB

## Abstract We analyze the hedging effectiveness of positions that replicate stock indexes using corresponding futures contracts through the application of a dynamic, stochastic hedging strategy proposed by Lafuente, J. A. and Novales, A. (2003). Conclusive gains do not emerge in any of the markets

Fractional cointegration and futures hed

Fractional cointegration and futures hedging

✍ Lien, Donald; Tse, Yiu Kuen 📂 Article 📅 1999 🏛 John Wiley and Sons 🌐 English ⚖ 190 KB

Uncertain tax rules and futures hedging

✍ Donald Lien 📂 Article 📅 1999 🏛 John Wiley and Sons 🌐 English ⚖ 87 KB

Corporate taxes and hedging with futures

✍ T. Hanan Eytan 📂 Article 📅 1990 🏛 John Wiley and Sons 🌐 English ⚖ 382 KB 👁 1 views

Tax-loss carryforward and futures hedgin

Tax-loss carryforward and futures hedging

✍ Donald Lien; Michael Metz 📂 Article 📅 2002 🏛 John Wiley and Sons 🌐 English ⚖ 139 KB

## Abstract Our research is motivated by the Corn Products vs Arkansas Best Supreme court decisions that brought on the controversy of the tax treatment of gains and losses from futures hedging. The usefulness of a futures contract as risk management tool depends on the tax code. In this paper we a

Futures Hedging Under Disappointment Ave

Futures Hedging Under Disappointment Aversion

✍ Donald Lien 📂 Article 📅 2001 🏛 John Wiley and Sons 🌐 English ⚖ 111 KB

## Abstract This article considers optimal futures hedging decisions when the hedger is disappointment‐averse (Gul, 1991). When the futures contract is a perfect hedge instrument, a disappointment‐averse hedger always holds a position closer to the full hedge than a nondisappointment‐averse hedger.