In this paper we use UK data to present strong empirical evidence that explains the mixed results in previous studies with respect to the effect of financial distress on the demand for corporate hedging. We build on recent studies that have identified a strong link between foreign currency (FC)...

In this paper we use survey data and data from annual reports to identify the determinants of hedging activity of United Kingdom (UK) firms in the context of an overall program of risk management. Comparing the two sets of data makes it possible to identify misclassified firms, that is, firms...

In the United Kingdom Financial Reporting Standard (FRS) 13, which came into force for March 1999 year-ends, requires narrative and numerical disclosure of all financial instruments held or issued, in order to provide information about their impact on the firm's risk profile. We use this...

In this paper we look at capital budgeting techniques when the abandonment value is stochastic. We investigate how these techniques can be exploited as management tools to aid not only in the invest/abandon decision but also in ongoing project management, financial forecasting and the timing of...

This paper measures how the risk associated with foreign direct investment in the prosperous, liberal economies of Hong Kong and Taiwan is affected by the prospect of reunification with the poor, politically and economically backward mainland. This China factor is modeled as a jump to a higher...

In this paper, I develop a model that measures the effects of political risk on the outcome of a foreign direct investment project as the value of an insurance policy that reimburses all losses resulting from the political event or events in question. The evolutionary process of political risk...

This paper examines FDI and expropriation in an economic framework that opposes the government's incentive to expropriate with the firm's cost of expropriation risk. Using standard methods of stochastic calculus, the value of expropriation to the government is modeled as a function of the value...

Investor behavior towards risk lies at the heart of economic decision making in general and modern investment theory and practice in particular. This paper uses both the mean-variance (MV) criterion and stochastic dominance (SD) procedures to analyze the preferences for four of the most widely...

In this paper we look at the cumulative conditional expected outcome of two dependent assets. We then develop a conditional stochastic dominance relation between the two assets. We use this to determine the composition of an optimal portfolio. We show that for any concave von Neumann-Morgenstern...

In this article we study the tradeoffs between average output and reduced volatility due to macroeconomic intervention. Using a Keynesian model of regulated Brownian motion with an endogenous producer/investor term, we show that when intervention is perfect and costless, the rewards in terms of...