Exchange Rate Risk Sharing Contract with Risk-averse Firms

In this paper, we consider a global supply chain model which includes a retailer and a manufacturer from different countries. We use a mean-variance model to study how the foreign exchange transaction exposure affects this global supply chain Furthermore, we design a risk sharing contract to improve the expected utilities of both the node enterprises. Based on our analysis, we find this risk sharing contract can realize the Pareto improvements in this global supply chain when the firms' risk aversion coefficients satisfy some conditions.