Operational Hedges and the Foreign Exchange Exposure of U.S. Multinational Corporations
Oklahoma State University Working Paper
30 Pages Posted: 11 Dec 2000
Date Written: October 2000
This paper examines the impact of operational hedges of US multinational corporations (MNCs) on their exchange rate exposure. The two important contributions of this study are as follows. First, this study documents the importance of operational hedges as significant determinants of exchange rate risk as measured by "breadth" and "depth" dimensions of the MNC foreign subsidiary network. Second, this finding remains robust even after examining the impact of operational hedges on exposure separately for net exporting and net importing MNCs.
Keywords: operational hedges, exchange rate risk, risk management, derivatives
JEL Classification: F23, F31
Suggested Citation: Suggested Citation