The typical conclusion reached when researchers examine exchange rate exposure is that only a few firms are exposed. This finding is puzzling since institutional knowledge and theory suggests a larger effect. In this paper, we compare results obtained using a linear approach with those from...

Using firm-level data, we show that higher derivatives market participation by emerging market firms contributed to the observed decline in the exchange rate exposure of these firms from 1995 to 2005. Our methodology follows a three-stage approach. First, we measure and report exchange rate...