Exchange Rate Risk in Public Firms.
With the Lunch Seminar series, the Department of Finance is bringing eminent and up-and-coming researchers from around the world to Luxembourg.
Abstract:
In their income statements, firms report their foreign exchange (FX) transaction income, i.e., the overall effect of exchange rate-induced revaluations of their monetary items, notably cash, accounts receivables and payables, and debt, all net of any financial hedging. Using such publicly available data, we revisit the exchange rate disconnect puzzle at the firm level in six major currency areas. We find that some firms report large values of FX transaction income that vary with net trade exposure and foreign currency debt, and that this FX transaction income passes through to their profits. Since firms do not fully hedge their exchange rate exposure, FX shocks affect their profits.
About Prof. Adrien Verdelhan:
Prof. Adrien Verdelhan is the Stephens Naphtal Professor of Finance and a Professor of Finance at the MIT Sloan School of Management.
His research focuses on measures of systematic risk in financial markets, particularly in currency and sovereign bond markets. Verdelhan’s work in international finance shows when and why exchange rates are risky, thus shedding light on the most well-known and puzzling currency trading strategy: the carry trade. His recent work focuses on arbitrage opportunities and the role of banking regulation. His research has been published notably in the American Economic Review, The Journal of Finance, and The Review of Financial Studies.
He is currently a Research Fellow of the National Bureau of Economic Research. He was elected Teacher of the Year in 2011, 2018, and 2020 by MIT Sloan students and received the Jamieson Prize for Excellence in Teaching in 2016.
He holds a PhD in economics from the University of Chicago.
Language: English
This is a free seminar. Registration is mandatory.
The seminar will be held in person.
Cold lunches are provided to registered participants.
Supported by the Luxembourg National Research Fund (FNR) 17984041