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Limits to Arbitrage and Hedging: Evidence from Commodity Markets

Acharya, Viral V; Lochstoer, Lars; Ramadorai, Tarun - C.E.P.R. Discussion Papers - 2009

futures contracts. Their hedging demand is met by financial intermediaries who act as speculators, but are constrained in risk …-taking. Increases (decreases) in producers’ hedging demand (the risk-bearing capacity of speculators) increase the costs of hedging … 1980-2006, we show that producers’ hedging demand - proxied by their default risk - forecasts spot prices, futures prices …

Persistent link: https://www.econbiz.de/10005016244

Public and Private Learning from Prices, Strategic Substitutability and Complementarity, and Equilibrium Multiplicity

Manzano, Carolina; Vives, Xavier - C.E.P.R. Discussion Papers - 2010

We study a general static noisy rational expectations model, where investors have private information about asset payo¤s, with common and private components, and about their own exposure to an aggregate risk factor, and derive conditions for existence and uniqueness (or multiplicity) of...

Persistent link: https://www.econbiz.de/10008466347

Hedging and Financial Fragility in Fixed Exchange Rate Regimes

Burnside, Craig; Eichenbaum, Martin; Rebelo, Sérgio - C.E.P.R. Discussion Papers - 1999

Currency crises that coincide with banking crises tend to share four elements. First, governments provide guarantees to domestic and foreign bank creditors. Second, banks do not hedge their exchange rate risk. Third, there is a lending boom before the crises. Finally, when the currency/banking...

Persistent link: https://www.econbiz.de/10005666882

Market Solutions to the Problem of Stabilising Commodity Earnings

Hughes Hallett, Andrew; Ramanujam, Prathap - C.E.P.R. Discussion Papers - 1990

This paper examines and compares the effectiveness of hedging and buffer-stock strategies for stabilizing the revenues …

Persistent link: https://www.econbiz.de/10005791351

Regulating Insider Trading when Investment Matters

Medrano, Luis Angel; Vives, Xavier - C.E.P.R. Discussion Papers - 2002

We analyse the effects of insider trading on real investment and welfare, and the consequences of different regulatory policies: a disclose-or-abstain rule, ‘fair’ disclosure, laissez-faire and forbidding insider trades based on ‘precise’ information. We perform the analysis in a model...

Persistent link: https://www.econbiz.de/10005791877

Corporate Bond Valuation and Hedging with Stochastic Interest Rates and Endogenous Bankruptcy

Acharya, Viral V; Carpenter, Jennifer - C.E.P.R. Discussion Papers - 2002

stochastic. It then uses the results to explain the dynamics of hedging. Bankruptcy rules are important determinants of corporate … produce the same prices, they can have very different hedging implications. We show that empirical results on the relation …

Persistent link: https://www.econbiz.de/10005123555

On the Fundamentals of Self-Fulfilling Speculative Attacks

Burnside, Craig; Eichenbaum, Martin; Rebelo, Sérgio - C.E.P.R. Discussion Papers - 2000

This paper proposes a theory of twin banking-currency crises in which both fundamentals and self-fulfilling beliefs play crucial roles. Fundamentals determine whether crises will occur. Self-fulfilling beliefs determine when they occur. The fundamental that causes ‘twin crises’ is government...

Persistent link: https://www.econbiz.de/10005123877

Is Cash Negative Debt? A Hedging Perspective on Corporate Financial Policies

Acharya, Viral V; Almeida, Heitor; Campello, Murillo - C.E.P.R. Discussion Papers - 2005

will allocate cash flows into cash holdings if their hedging needs are high (i.e., if the correlation between operating … if their hedging needs are low. The empirical examination of debt and cash policies of a large sample of firms reveals … hedging needs have a strong propensity to save cash out of cash flows while leaving their debt positions unchanged. In …

Persistent link: https://www.econbiz.de/10005124183

Entrepreneurial Incentives in Stock Market Economies

Acharya, Viral V; Bisin, Alberto - C.E.P.R. Discussion Papers - 2002

A Capital Asset Pricing Model of a stock market economy is examined under different corporate governance structures in which the objectives of managers and entrepreneurs in choosing the risk composition of their firms' returns are not aligned with those of shareholders and investors because of...

Persistent link: https://www.econbiz.de/10005124325

Short- and Long-term Hedging for the Corporation

Dumas, Bernard J - C.E.P.R. Discussion Papers - 1994

Exchange risk hedging in a static (i.e. one-period) setting is extremely straightforward. The variance-minimizing hedge …

Persistent link: https://www.econbiz.de/10005136503