Decision Making Tool to Hedge Exchange Rate RiskFrancisco Fraire and David Leatham () No 133082, 2006 Agricultural and Rural Finance Markets in Transition, October 2-3, 2006, Washington, DC from Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition Abstract: New econometric and statistical techniques have been used in recent years to provide with exchange rates forecasting models that can statistically outperform a random walk. In particular, a model that uses the term structure of forward premia into a regime-switching vector error correction model has proven to be successful at such a task. In this paper, we propose that the exchange rate fluctuations are not solely influenced by the economic fundamentals of those countries involved in the exchange. Therefore, the accuracy of the aforementioned model can be improved by separately forecasting the average change in value of each of the currencies involved in the exchange rate, instead of forecasting the exchange rate itself. This is achieved by using a low volatility currency basket to transform the data before and after the modeling. Keywords: Agricultural Finance; Risk and Uncertainty (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ags:nc2006:133082 Access Statistics for this paper More papers in 2006 Agricultural and Rural Finance Markets in Transition, October 2-3, 2006, Washington, DC from Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.