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The minimum variance hedge and the bankruptcy risk of the firm

Hahnenstein, Lutz and Röder, Klaus (2003) The minimum variance hedge and the bankruptcy risk of the firm. Review of Financial Economics 12 (3), pp. 315-326.

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Abstract

In this paper, we analyze the influence of hedging with forward contracts on the firm's probability of bankruptcy (POB). The minimization of this probability can serve as a substitute for the maximization of shareholders' wealth. It is shown that the popular minimum variance hedge is generally neither necessary nor sufficient for the minimization of the firm's POB. Moreover, our model suggests a ...

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Item type:Article
Date:2003
Institutions:Business, Economics and Information Systems > Institut für Betriebswirtschaftslehre > Lehrstuhl für Finanzdienstleistungen (Prof. Dr. Klaus Röder)
Interdisciplinary Subject Network:Immobilien- und Kapitalmärkte
Identification Number:
ValueType
10.1016/S1058-3300(03)00036-3DOI
Keywords:Corporate hedging; Risk management; Default risk; Bankruptcy; Forward contracts
Dewey Decimal Classification:300 Social sciences > 330 Economics
Status:Published
Refereed:Yes, this version has been refereed
Created at the University of Regensburg:Unknown
Item ID:5379
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