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...

This paper develops an expected utility model of a multinational firm facing exchange rate risk exposure to a foreign currency cash flow. Currency derivative markets do not exist between the domestic and foreign currencies. There are, however, currency futures and options markets between the...

When firms in the same industry located in different regions or countries experience shocks to production costs in their respective industries that are imperfectly correlated, arbitrage opportunities automatically lead to trade. Trade can either stabilize or destabilize the price faced by...

The paper examines the impact of uncertainty on the decision problem of an international firm. The uncertainty under which the firm decides on home and foreign supply is affected by an information system that conveys public signals about the random spot exchange rate. Our notion of transparency...

This study examines the optimal design of a futures hedge program for the competitive firm under output price uncertainty. All futures contracts are unbiased and marked to market in that they require interim cash settlement of gains and losses. The futures price dynamics follows a first‐order...

In this paper, the behavior of the competitive firm under price uncertainty when the firm has access to an intertemporally unbiased futures market is examined. Futures contracts are marked‐to‐market and thus require interim cash settlement of gains and losses. The firm is subject to a...

This paper examines the behavior of the competitive firm under price uncertainty in general and the hedging role of futures spreads in particular. The firm has access to a commodity futures market where unbiased nearby and distant futures contracts are transacted. A liquidity constraint is...