The Determinant Factors of Hedging and Speculation with Foreign Exchange Derivatives of Brazilian Private Firms

The Determinant Factors of Hedging and Speculation with Foreign Exchange Derivatives of Brazilian Private Firms

• Author
• Fernando Nascimento de Oliveira
• Abstract

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  This paper examines the determinant factors of hedging and speculation with foreign exchange derivatives of Brazilian private firms. We build an original database of 211,746 contracts of plain vanilla derivatives of foreign exchange from 2010 to 2021 of these firms. From these contracts, we identify that the most relevant factor that affects positively hedging is foreign exchange exposure, while profitability is the most important factor that affects negatively speculation. Our results are statistically significant and are robust to different specifications and econometric techniques, in particular, to those that deal with endogeneity of regressors and measurement errors of binary dependent variables.

   

• Keywords
• foreign exchange derivatives, hedge, speculation, private firms, determinant factors
• Subject Area
• Asset pricing, investments, and Derivatives

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