We suggest a joint optimization model for a firm’s hedging and leverage decisions that helps to establish an integrated framework for value creation. Rather than artificially separating the two interrelated parts of the firm’s financial policy, we treat both corporate decision variables as...

This paper develops a theory of a firm’s hedging decision with endogenous leverage. In contrast to previous models in the literature, our framework is based on less restrictive distributional assumptions and allows a closed-form analytical solution to the joint optimization problem. Using...