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Managing Corporate FX Risk: A Value-Maximizing Approach

Author

Listed:
  • Tom Copeland
  • Maggie Copeland

Abstract

This paper develops a new approach for evaluating FX management programs. It presents a value-maximizing strategy based on minimizing the probability of business disruption. It argues that such a policy is an appropriate objecting for a corporate FX hedging program and shows that minimization of the variance of the hedged cash flow is neither necessary no sufficient for an FX hedging program to be optimal.

Suggested Citation

  • Tom Copeland & Maggie Copeland, 1999. "Managing Corporate FX Risk: A Value-Maximizing Approach," Financial Management, Financial Management Association, vol. 28(3), Fall.
    • Handle: RePEc:fma:fmanag:copeland99
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    Cited by:

    1. Milind M. Shrikhande & Larry D. Wall, 2000. "Managing the risk of loans with basis risk: sell, hedge, or do nothing?," FRB Atlanta Working Paper 2000-25, Federal Reserve Bank of Atlanta.
    2. Monda, Barbara & Giorgino, Marco & Modolin, Ileana, 2013. "Rationales for Corporate Risk Management - A Critical Literature Review," MPRA Paper 45420, University Library of Munich, Germany.
    3. Kevin Aretz & Söhnke M. Bartram, 2010. "Corporate Hedging And Shareholder Value," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 33(4), pages 317-371, December.

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