Measuring macroeconomic exposure: The case of Volvo Cars
Publikation/Tidskrift/Serie: Journal of European Financial Management
Volvo Cars' economic exposure to exchange rates and other macroeconomic variables is estimated using quarterly cash flows as the firm's target variable. We discuss first several issues relating to management's view of the macroeconomic environment, as well as the firm's objective and structure. These issues must be addressed before multiple regression analysis can be implemented with the purpose of estimating exposures. the use of cash flow exposure coefficients for evaluating exposure and choosing currency denomination of liabilities is illustrated, and an out-of-sample analysis of the estimated exposure coefficients is carried out.
- Business and Economics
- economic and cash flow corporate exposure
- exchange rate risk
- macroeconomic exposure management