Thesis (M.M. (Finance & Investment))--University of the Witwatersrand, Faculty of Commerce, Law and Management, Graduate School of Business Administration, 2013. / This study provides an analysis of the effectiveness of the foreign currency hedging abilities
afforded by the futures market. The focus is on the currencies of six emerging markets,
namely; Brazil, India, Mexico, Russia, South Africa and Turkey. By examining emerging
market currencies we can examine the effect that possible mispricing and lack of liquidity can
have on hedging effectiveness. To this effect, this article uses the regression method, as
allowed by the accounting standard FAS 133, to assess the effectiveness of futures contracts
as a hedging mechanism for emerging market currencies. The methods follow previous
studies such as Hill and Schneeweis (1982) which consider the length of the hedging horizon
and time to expiration due to their effect on hedge effectiveness. Results indicate consistent
hedge effectiveness in only South Africa and Turkey, with reasonable hedge effectiveness
exhibited by Mexico and Russia. Sensible explanations are given for the extreme hedge
ineffectiveness that can be seen in the Brazilian and Indian tests.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:wits/oai:wiredspace.wits.ac.za:10539/13053 |
| Date | 21 August 2013 |
| Creators | Ben-David, Tal Aaron |
| Source Sets | South African National ETD Portal |
| Language | English |
| Detected Language | English |
| Type | Thesis |
| Format | application/pdf |
Page generated in 0.0019 seconds