Hedging currency futures basis risk : a SADC uniform currency perspective

[摘要] ENGLISH ABSTRACT: The implementation or adaption of a common currency by a group of countries has managerial as well as risk management implications for these emerging market multinational corporations (EMNC'S). This study sets out to examine these business management implications and the computation of a fictitious uniform currency for the SADC region, 'SADC dollar to derive its optimality should the SADC dollar replace the ZAR. This optimality was determined by comparing the basis risk of currency futures hedge positions using both the USD/ZAR on a ZAR currency index and USD/SADC dollar on a SADC currency index as the respective underlings.Findings indicated that the basis risk and currency risk declined over a time-series analysis which implied better business management decisions, increased profit margins, larger firm value and more effective hedged positions for the companies in South Africa that may adopt this new currency.

[发布机构] Stellenbosch University