Currency cross-hedging strategy for the Asia-Pacific region

This paper establishes currency cross-hedging strategies for the Asia-Pacific Region based on purchasing power parity and fundamental analysis by taking into account the fact that the previous studies neglect the fundamental relationship between the hedging currencies and the underlying currencies and the their relationships are not stable. This paper also conducts the empirical investigation by utilizing the proposed models and employing the data from International Financial Statistics (IMF). The empirical results show that the proposed strategies are more effective in reducing the currency risk than the conventional strategies.