complementary measures: (1) actual changes in firms' derivative and hedging disclosures, and (2) pre-SFAS 161 levels of firms …' derivative and hedging activities. Both measures provide consistent evidence that bid-ask spreads decreased more for firms whose … reduced information asymmetry among investors regarding the effects of derivative and hedging activities on firm value. These …

We present an asymmetric information model of hedging that has the intuition that hedging is undertaken by higher … ability managers who wish to "lock-in" the higher profits that result from their higher ability. Thus, hedging is an attempt … involves hedging by higher ability managers always exists. Lower ability managers also hedge when differences in abilities are …