Applicability of the wavelet-approach for corporate hedging. (2015)

• Record Type: Journal Article
• Authors: Pelster, Matthias; Springer, Tobias
• Is Part Of: International journal of portfolio analysis & management. Volume 2:Number 1(2015)
• Page Start: 1
• Page End: 35
• Publication Date: 2015
• Subjects: wavelets -- time-scale dependent correlations -- corporate hedging -- exchange rate risks -- optimal hedge ratios -- risk management -- planning horizons -- exchange rates -- background risks -- spot rates -- futures rates; Investment analysis -- Periodicals; 332.605
• Languages: English
• ISSNs: 2048-2361

Abstract

We suggest the use of the wavelet-approach to determine optimal hedge ratios in order to adjust risk management positions to planning horizons. The wavelet-approach permits resolution of the signal in terms of the time scale of analysis. We analyse the wavelet correlations between several time series and find significant differences in short-term and long-term correlations between exchange rates and 'background risks'. At the same time, we do not find such a difference between spot and future rates for most exchange rates.