The effectiveness of financial-hedging techniques: a Gulf Cooperation Council perspective
by Ahmad Bash; Abdullah M. Al-Awadhi; Musaed Al-Ali
International Journal of Accounting and Finance (IJAF), Vol. 6, No. 3, 2016

Abstract: The paper examines the effectiveness of financial-hedging techniques - forward hedging, money-market hedging and cross-currency hedging, for a domestic firm in the Gulf Cooperation Council with foreign-currency exposure to GBP, CHF and JPY. The results show that there is no difference between using forward hedging or money-market hedging, owing to the high correlation between spot and forward rates. However, in relation to cross-currency hedging, the results are mixed: the effectiveness of cross-currency hedging depends on exchange-rate correlation.

Online publication date: Fri, 20-Jan-2017

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