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A Note on Dual Hedging

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  • Donald Lien

    (Department of Economics, University of Texas-San Antonio, U.S.A.)

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    Abstract

    Under current Internal Revenue Services guidelines, gains from futures contracts serving price (quantity) risk management purposes are treated as ordinary (capital) income. This paper finds that, although dual hedging opportunities are available, the asymmetric tax treatment prevents firms from trading "quantity" futures contracts.

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    Bibliographic Info

    Article provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.

    Volume (Year): 3 (2004)
    Issue (Month): 1 (April)
    Pages: 29-34

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    Handle: RePEc:ijb:journl:v:3:y:2004:i:1:p:29-34

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    Postal: 100 Wenhwa Road, Seatwen, Taichung
    Web page: http://www.ijbe.org/
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    Related research

    Keywords: dual hedging; ordinary income; capital income;

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    1. Donald Lien, 1999. "Uncertain tax rules and futures hedging," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 20(8), pages 429-436.
    2. Ronald I. McKinnon, 1967. "Futures Markets, Buffer Stocks, and Income Stability for Primary Producers," Journal of Political Economy, University of Chicago Press, vol. 75, pages 844.
    3. Tomislav Vukina & Dong-feng Li & Duncan M. Holthausen, 1996. "Hedging with Crop Yield Futures: A Mean-Variance Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(4), pages 1015-1025.
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