Production Flexibility and Hedging

Risks

Georges Dionne³  Marc Santugini¹  Emiliano A. Valdez²  Albert Cohen² 

[1] Department of Applied Economics and CIRPÉE, HEC Montréal, Montréal, QC H3T 2A7, Canada; E-Mail:;id="af1-risks-03-00543">1Department of Finance, CIRPÉE and CIRRELT, HEC Montréal, Montréal, QC H3T 2A7, Cana;Department of Finance, CIRPÉE and CIRRELT, HEC Montréal, Montréal, QC H3T 2A7, Canada

关键词: hedging;    full-hedging result;    production flexibility;    price and output uncertainty;   

DOI  :  10.3390/risks3040543

来源: mdpi

【 摘 要 】

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.

【 授权许可】

CC BY   
© 2015 by the authors; licensee MDPI, Basel, Switzerland.