We consider the effect of hedging with foreign currency derivatives on Brazilian firms in the period 1997 through 2004 …, a period that includes the Brazilian currency crisis of 1999. We find that, derivative users have valuations that are … higher than non-user firms. Hedging with currency derivatives allows firms to sustain larger capital investments, and also …

Risk management is the most widely-cited reason that non-financial corporations use derivatives. If hedging programs … that firms with derivative positions without a hedge accounting designation (typically higher basis risk) have higher CDS …