Wednesday, November 24, 2004

The value of hedging revisited...

Does Hedging with Derivatives REDUCE THE MARKET Risk Exposure by Bali, Hume, and Martell

Put your thinking caps on for this one!

Short version: Hedging, at least as it is currently being done, may not add to firm value. Longer version: In a Modigliani and Miller world nothing really matters. This includes dividend policy, capital structure, and hedging. Hedging is the idea that by buying or

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