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Title: |
Export as an Option |
| Author: |
Broll, Udo |
| Author
Affiliation: |
U Munich |
| Source: |
International Economic Journal, Spring 1999, v. 13, no. 1, pp. 19-26 |
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Publication Date: |
Spring 1999 |
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Abstract: |
This note studies the implications of a
firm's advantage to allocate production to different markets under
exchange rate risk. As exchange rate volatility increases, so does the
value of the option to export. The firm's flexibility can be seen as a
real hedging instrument. This kind of risk management policy has the
advantage that the hedge instrument is sensitive to the realization of
foreign spot exchange rates. Multinational firms, especially, can be
regarded as flexible firms because of their use of worldwide
distribution facilities. |
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