Optimal dynamic hedging portfolios and the currency composition of external debt
We present a model which shows that the currency composition of a country's external debt can serve as a hedging instrument against changes in exchange rates and commodity prices. Because our model permits the second moments to change through time, we get a sequence of optimal dynamic hedging p...
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| Veröffentlicht in: | Journal of international money and finance 1991-03, Vol.10 (1), p.131-148 |
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| container_end_page | 148 |
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| container_title | Journal of international money and finance |
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| creator | Kroner, Kenneth F. Claessens, Stijn |
| description | We present a model which shows that the currency composition of a country's external debt can serve as a hedging instrument against changes in exchange rates and commodity prices. Because our model permits the second moments to change through time, we get a sequence of optimal dynamic hedging portfolios which can be estimated with a multivariate Generalized Autoregressive Conditional Heteroskedasticity (GARCH) model. To illustrate the usefulness of the technique we apply it to Indonesia and it is found, as expected, that Indonesia's optimal debt portfolio consists of a much larger proportion of US dollars and a much smaller proportion of Japanese yen than they have in their current debt portoflio. |
| doi_str_mv | 10.1016/0261-5606(91)90031-E |
| format | Article |
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| ispartof | Journal of international money and finance, 1991-03, Vol.10 (1), p.131-148 |
| issn | 0261-5606 1873-0639 |
| language | eng |
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| source | RePEc; Periodicals Index Online; Access via ScienceDirect (Elsevier) |
| subjects | Comparative studies Currencies Economic models External debt Foreign exchange rates Hedging Monetary theory Multivariate analysis Optimal Portfolio management Terms of trade |
| title | Optimal dynamic hedging portfolios and the currency composition of external debt |
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