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Hedging Foreign Exchange Risk in Chile: Markets and Instruments

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  • Mr. Jorge A Chan-Lau

Abstract

Policy makers have expressed interest in fostering the development of local foreign exchange derivatives markets with a view to reducing risks arising from currency mismatches between assets and liabilities in the corporate sector. This paper assesses foreign exchange exposure in the corporate sector in Chile, analyzes the current state of the foreign exchange derivatives market in Chile, and argues that liquid and developed foreign exchange derivatives markets can help promote financial stability.

Suggested Citation

  • Mr. Jorge A Chan-Lau, 2005. "Hedging Foreign Exchange Risk in Chile: Markets and Instruments," IMF Working Papers 2005/037, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2005/037
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    References listed on IDEAS

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    1. Ricardo J Caballero & Kevin Cowan & Jonathan Kearns, 2004. "Fear of Sudden Stops: Lessons from Australia and Chile," RBA Research Discussion Papers rdp2004-03, Reserve Bank of Australia.
    2. Dominguez, Kathryn M.E. & Tesar, Linda L., 2006. "Exchange rate exposure," Journal of International Economics, Elsevier, vol. 68(1), pages 188-218, January.
    3. Viviana Fernández, 2002. "The Derivatives Markets in Latin America with an Emphasis on Chile," Documentos de Trabajo 128, Centro de Economía Aplicada, Universidad de Chile.
    4. Detemple, Jerome & Jorion, Philippe, 1990. "Option listing and stock returns : An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 14(4), pages 781-801, October.
    5. Niclas Hagelin, 2003. "Why firms hedge with currency derivatives: an examination of transaction and translation exposure," Applied Financial Economics, Taylor & Francis Journals, vol. 13(1), pages 55-69.
    6. Graciela Moguillansky, 2002. "Non-Financial Corporate Risk Management and Exchange Rate Volatility in Latin America," WIDER Working Paper Series DP2002-30, World Institute for Development Economic Research (UNU-WIDER).
    7. repec:bla:jfinan:v:44:y:1989:i:2:p:487-98 is not listed on IDEAS
    8. World Bank & International Monetary Fund, 2004. "Financial Sector Assessment : Chile," World Bank Publications - Reports 15819, The World Bank Group.
    9. Hoa Nguyen & Robert Faff, 2002. "On The Determinants of Derivative Usage by Australian Companies," Australian Journal of Management, Australian School of Business, vol. 27(1), pages 1-24, June.
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    Cited by:

    1. International Monetary Fund, 2006. "Colombia; Selected Issues," IMF Staff Country Reports 06/401, International Monetary Fund.
    2. Shotar, M.M. & El-Mefleh, M.A., 2009. "Economic Exposure To Exchange Rates In Jordan Companies: A Monthly Econometric Model Of The Rate Of Return Of Firms, 2004-2007," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 9(1).
    3. Jose M. Berrospide, 2008. "Exchange rates, optimal debt composition, and hedging in small open economies," Finance and Economics Discussion Series 2008-18, Board of Governors of the Federal Reserve System (U.S.).
    4. Lourdes Treviño, 2005. "Development and volume growth of organized derivatives trade in emerging markets," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 31-82, November.
    5. Sweta Saxena & Agustin Villar, 2008. "Hedging instruments in emerging market economies," BIS Papers chapters, in: Bank for International Settlements (ed.), Financial globalisation and emerging market capital flows, volume 44, pages 71-87, Bank for International Settlements.
    6. Albagli, Elias & Calani, Mauricio & Hadzi-Vaskov, Metodij & Marcel, Mario & Ricci, Luca Antonio, 2020. "Comfort in Floating: Taking Stock of Twenty Years of Freely-Floating Exchange Rate in Chile," CEPR Discussion Papers 14967, C.E.P.R. Discussion Papers.
    7. Dodd, Randall & Griffith-Jones, Stephany, 2007. "Report on derivatives markets: stabilizing or speculative impact on Chile and a comparison with Brazil," Documentos de Proyectos 3559, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    8. International Monetary Fund, 2005. "Chile: Selected Issues," IMF Staff Country Reports 2005/316, International Monetary Fund.
    9. Jorge Feregrino & Juan Felipe Espinosa-Cristia & Nelson Lay & Luis Leyton, 2022. "Inappropriate Corporate Strategies: Latin American Companies That Increase Their Value by Short-Term Liabilities," IJFS, MDPI, vol. 10(4), pages 1-15, October.
    10. Erwin Hansen S. & Stuart Hyde, 2013. "Determinants of corporate exchange rate exposure in Chilean firms," Journal Economía Chilena (The Chilean Economy), Central Bank of Chile, vol. 16(3), pages 70-88, December.

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