This paper examines the individual performance of three major Australian trading banks in managing their foreign currency exposures. It finds that: (i) on average, the banks could have reduced ex ante foreign currency portfolio risk by over 80 per cent by selecting mean-variance efficient portfolios; (ii) the returns on foreign currency positions were small relative to the underlying risks; (iii) ex ante risk increased over the sample period from October 1984 to April 1987 but this was due largely to an increase in the size of foreign currency portfolios rather than to any shift towards relatively more risky positions; and (iv) the banks improved their risk performance over the sample period.
|Number of pages||17|
|Journal||Journal of Banking and Finance|
|Publication status||Published - 1994|