IDEAS home Printed from https://ideas.repec.org/a/cup/jfinqa/v8y1973i01p105-110_01.html
   My bibliography  Save this article

The Optimal Level of Forward Exchange Transactions

Author

Listed:
  • Folks, William R.

Abstract

The basic model of this paper is that of a transactor who is to receive at a specified time t in the future a fixed quantity of domestic funds Ad and a fixed quantity of foreign funds Af. It is further assumed that there exists a forward market in foreign exchange in which one unit of foreign currency can be bought and sold at a given and known forward rate rf, the domestic currency price of one unit of foreign currency. Let X be the net forward purchases of foreign exchange that the transactor undertakes at the market rate rf; a negative value of X indicates net sales of forward exchange. It is assumed that at time t the foreign currency will be convertible for the transactor at a fixed but unknown spot exchange rate and that the transactor can assess or derive a probability distribution on this spot exchange rate f(rt) for rt > 0. Finally, it is assumed that the transactor can express a utility function u on the domestic currency equivalent of his ending currency holdings. This paper considers the problem of determining the optimal level of forward exchange purchases X0.

Suggested Citation

  • Folks, William R., 1973. "The Optimal Level of Forward Exchange Transactions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 8(1), pages 105-110, January.
    • Handle: RePEc:cup:jfinqa:v:8:y:1973:i:01:p:105-110_01
    as

    Download full text from publisher

    File URL: https://www.cambridge.org/core/product/identifier/S0022109000019128/type/journal_article
    File Function: link to article abstract page
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Devi Singh, 1998. "Managing Currency Risk," Vision, , vol. 2(2), pages 6-10, July.
    2. Hinz, Holger, 1990. "Some advances in supporting international financial management decisions," Manuskripte aus den Instituten für Betriebswirtschaftslehre der Universität Kiel 248, Christian-Albrechts-Universität zu Kiel, Institut für Betriebswirtschaftslehre.
    3. Masahiro Kawai, 1980. "Three roles of the forward foreign exchange market," International Finance Discussion Papers 170, Board of Governors of the Federal Reserve System (U.S.).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cup:jfinqa:v:8:y:1973:i:01:p:105-110_01. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk Stebbing (email available below). General contact details of provider: https://www.cambridge.org/jfq .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.