Consider a simple two-state risk with equal probabilities for the two states. In particular, assume that the random … way, we can extend and generalize existing results about risk attitudes. This lottery preference includes behavior … exhibiting higher order risk effects, such as precautionary effects and tempering effects. …

speculative hedging is. Analysing tax-sensitivity of the corporate hedge shows that a higher risk in the first place may reduce …Using a two-moment decision model this paper analyzes corporate hedging behavior in the presence of unified and … differential income taxation. We start with the well-known result that risk-taking may increase when income tax rates increase and …

uncertainty and hedging opportunities. Market transparency is modeled by means of the informational content of publicly observable …

. For example, the nature of monotonicity of the indifference curve depends on the underlying mean. Price hedging decisions … hedging decisions within the prospect theory. We illustrate our general considerations with a thoroughly worked out example. …

This paper studies the impact of counter-party default risk of forward contracts on a firm's production and hedging … decisions. Using a model of a risk-averse competitive firm under price uncertainty, it derives several fundamental results. If … expected profits from forward contracts are zero, the hedge ratio is surprisingly not affected by default risk under general …

. We find that, depending on whether futures contracts are used for risk reduction (i.e., hedging) or risk taking (i …This paper explores the linkage between corporate risk management strategies, investment, and economic stability in an … exposure - caused by balance sheet effects as in Krugman (2000) - and therefore their investments' sensitivity to currency risk …

, price level and futures price and hence real wealth is stochastic. For a risk averse investor, optimal consumption and … hedging strategy are derived and discussed. It is shown that hedging increases the investor's wellbeing in terms of …

corporate hedging: equity value maximising strategies and strategies determined by managerial risk aversion. The first category …Finance theory does not provide a comprehensive framework for explaining risk management within the imperfect financial … environment in which firms operate. Corporate managers, however, rank risk management as one of their most important objectives …