Optimal Hedging Strategies and Interactions between Firms
AbstractThis paper studies corporate risk management in a context of financial constraints and imperfect competition in the product market. The paper shows that interactions between firms affect their hedging strategies. As a general rule, firms' hedging demands decrease with the correlation between their internal funds and investment opportunities. Moreover, when a firm's hedging demand is high in the case where investments are strategic substitutes, its hedging demand is low in the case where investments are strategic complements and vice versa.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal Journal of Economics & Management Strategy.
Volume (Year): 21 (2012)
Issue (Month): 1 (03)
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Web page: http://www.kellogg.northwestern.edu/research/journals/JEMS/
Other versions of this item:
- Frederic Loss, 2002. "Optimal hedging strategies and interactions between firms," LSE Research Online Documents on Economics 24903, London School of Economics and Political Science, LSE Library.
- Frederic Loss, 2002. "Optimal Hedging Strategies and Interactions between Firms," FMG Discussion Papers dp399, Financial Markets Group.
- Loss, Frédéric, 2012. "Optimal Hedging Strategies and Interactions between Firms," Economics Papers from University Paris Dauphine 123456789/12110, Paris Dauphine University.
- G3 - Financial Economics - - Corporate Finance and Governance
- D29 - Microeconomics - - Production and Organizations - - - Other
- G2 - Financial Economics - - Financial Institutions and Services
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"On the strategic value of risk management,"
IDEI Working Papers
739, Institut d'Économie Industrielle (IDEI), Toulouse.
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