Hedging Behaviour of Czech Exporting Firms

Vlastimil Čadek, Helena Rottová, Branislav Saxa

The hedging behaviour of Czech exporting firms is analysed using questionnaire information and interviews with banks. Approximately 60% of the 184 firms surveyed hedge their FX exposures, and about 88% of their exports are hedged. Most exporters use natural hedging, i.e. they balance incoming and outgoing payments in foreign currency as well as foreign currency assets and liabilities. Hedgers on financial markets prefer forwards and zero-cost option structures, as they are reluctant to pay option premiums. The typical maturity of financial instruments is three months to one year. More than one half of exporters hedge consistently, while around 60% hedge actively, taking advantage of currency moves. Our simple model of hedging behaviour for example suggests that trading within a group reduces the need for hedging.

JEL codes: F14, F23, F31, G32
Keywords: Exchange rate exposure, exchange rate risk, exports, hedging behaviour
Issued: December 2011

Download: CNB WP No. 14/2011 (pdf, 360 kB)