Invoicing under exchange rate risk : the exporting firm

Abstract

The basis for our analysis is a monopolistic risk neutral exporting firm searching for optimum invoicing under exchange rate risk. The exporting firm exposes itself to various risks depending on the selection of the invoicing currency, namely a transaction risk while selecting the currency of the importer (local currency pricing) and an economic risk while selecting the currency of the exporter (producer currency pricing). The resulting risk is different in both cases and can therefore be influenced by the selection of the invoicing currency. (original abstract)