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| Volume 7, No. 2,
August 2008 |
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Offshore Bidding and Currency
Futures |
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| Donald
Lien |
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Department of Economics, University of
Texas at San Antonio, U.S.A. |
| Fathali
Firoozi |
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Department of Economics, University of
Texas at San Antonio, U.S.A. |
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| Abstract |
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In an interactive
model of offshore bidding, two firms located in two different
countries bid on a project in a third country under exchange rate
uncertainty. Every firm benefits and provides a higher bid when both
firms have hedging opportunities. Even if only one bidder has the
hedging opportunity, both bidders gain through an increase in their
expected utilities. |
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Key words:
exchange rate; futures markets; uncertainty; game theory;
multinational enterprise |
| JEL
classification:
F3; C7; D8 |
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