Currency hedging in Norwegian non-financial firms

Currency hedging in Norwegian non-financial firms

Bernt Arne Ødegaard og Øystein G Børsum

Fluctuations in global foreign exchange markets in recent years have again shown that many Norwegian enterprises are sensitive to changes in exchange rates, in both a positive and negative sense. The question nat- urally arises as to how companies can best hedge against such fluctuations and what hedging techniques that are actually used by Norwegian enterprises. This article summarises the results of a survey conducted by Norges Bank in summer 2004. The survey focused on the use of currency derivatives, but also posed more general questions regarding hedging. The article starts with a brief description of exchange rate risk and the most relevant risk management instruments, followed by some comments regarding the theory of companies' derivatives usage and an overview of international empirical studies in the field, before presenting the most important results of the Norwegian survey.

Article as a pdf file.