Loss, Frederic (2002) Optimal hedging strategies and interactions between firms. Financial Markets Group Discussion Papers (399). Financial Markets Group, The London School of Economics and Political Science, London, UK.
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Abstract
This paper studies corporate risk management in a context with financial constraints and imperfect competition on the product market. We show that the interactions between firms heavily affect their hedging demand. As a general rule, the firms’ hedging demand decreases with the correlation between firms’ internal funds and investment opportunities. We show that when the hedging demand of a firm 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. Finally, we also propose another interpretation of our model in terms of technical choice.
| Item Type: | Monograph (Discussion Paper) |
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| Official URL: | http://fmg.ac.uk |
| Additional Information: | © 2002 The Author |
| Divisions: | Financial Markets Group |
| Subjects: | H Social Sciences > HF Commerce H Social Sciences > HG Finance H Social Sciences > HB Economic Theory |
| JEL classification: | G - Financial Economics > G3 - Corporate Finance and Governance D - Microeconomics > D2 - Production and Organizations > D29 - Other G - Financial Economics > G2 - Financial Institutions and Services |
| Date Deposited: | 19 Aug 2009 10:48 |
| Last Modified: | 13 Sep 2024 19:47 |
| URI: | http://eprints.lse.ac.uk/id/eprint/24903 |
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