Cite JOURNAL ARTICLE
Export Decision and Risk Sharing Markets
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 115 (1995), Iss. 1 : pp. 27–36
If we consider a risk-averse international firm under exchange rate risk in the absence of risk sharing markets, then exchange rate uncertainty has an inverse effect on export production of the firm. Provided that currency futures and currency option markets are available, the firm can undo the inverse effect of exchange rate uncertainty. The firm is able to realize even a riskless profit if the hedging markets are unbiased.