Information Value, Export and Hedging

Dresden Discussion Paper in Economics No. 03/11

20 Pages Posted: 4 May 2011  

Udo Broll

Dresden University of Technology - Faculty of Economics and Business Management

Bernhard Eckwert

Bielefeld University - Department of Business Administration and Economics

Date Written: May 3, 2011

Abstract

The paper analyzes the interactions between the precision of information, trade and welfare within a decision framework of an exporting firm. Information in a financial market is described in terms of a publicly observable signal. With higher transparency, the signal conveys more precise information about the random foreign exchange rate. More precise information about exchange rate changes has ambiguous effects on trade and welfare which depend critically on technology of the firm and the degree of risk aversion.

Keywords: Exchange rate risk, trade, futures market, market transparency, value of information

JEL Classification: F11, F23, G14, G15

Suggested Citation

Broll, Udo and Eckwert, Bernhard, Information Value, Export and Hedging (May 3, 2011). Dresden Discussion Paper in Economics No. 03/11. Available at SSRN: https://ssrn.com/abstract=1830162 or http://dx.doi.org/10.2139/ssrn.1830162

Udo Broll (Contact Author)

Dresden University of Technology - Faculty of Economics and Business Management ( email )

Mommsenstrasse 13
Dresden, D-01062
Germany

Bernhard Eckwert

Bielefeld University - Department of Business Administration and Economics ( email )

D-33501 Bielefeld
Germany
+49 521 106 6926 (Phone)
+49 521 106 6416 (Fax)

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