Optimal hedging strategies and interactions between firms

Frédéric Loss ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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.

Keywords: hedging; Interactions between firms; Credit rationing (search for similar items in EconPapers)
JEL-codes: D29 G2 G3 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2002-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://eprints.lse.ac.uk/24903/ Open access version. (application/pdf)

Related works:
Journal Article: Optimal Hedging Strategies and Interactions between Firms (2012)
Working Paper: Optimal Hedging Strategies and Interactions between Firms (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:24903

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