Production Flexibility and Hedging
Georges Dionne and
Marc Santugini ()
Additional contact information
Marc Santugini: Department of Applied Economics and CIRPÉE, HEC Montréal, Montréal, QC H3T 2A7, Canada
Risks, 2015, vol. 3, issue 4, 1-10
We extend the analysis on hedging with price and output uncertainty by endogenizing the output decision. Specifically, we consider the joint determination of output and hedging in the case of flexibility in production. We show that the risk-averse firm always maintains a short position in the futures market when the futures price is actuarially fair. Moreover, in the context of an example, we show that the presence of production flexibility reduces the incentive to hedge for all risk averse agents.
Keywords: hedging; full-hedging result; production flexibility; price and output uncertainty; G1; L2 (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 M2 M4 K2 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
Working Paper: Production Flexibility and Hedging (2014)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:gam:jrisks:v:3:y:2015:i:4:p:543-552:d:59972
Access Statistics for this article
Risks is currently edited by Prof. Dr. J. David Cummins
More articles in Risks from MDPI, Open Access Journal
Bibliographic data for series maintained by XML Conversion Team ().