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Title:Hedging Revisited: Resolving Contractual Conflict
Author(s):Pennings, Joost M.E.; Leuthold, Raymond M.
Subject(s):futures
computer-guided study
hedging
Abstract:This paper develops an alternative view on the motivation to hedge. A conceptual model shows how hedging facilitates contract relationships between firms and can solve conflicts between firms. In this model, firms’ contract preferences, level of power and conflicts in contractual relationships are driving usage of futures contracts. The model shows how using futures markets can provide a jointly preferred contracting arrangement, thereby enhancing relationships between firms. The robust nature of the conceptual model is empirically examined through a computer-guided study of various firms.
Issue Date:2000-01
Publisher:Office for Futures and Options Research, Department of Agricultural Economics, College of Agricultural, Consumer, and Environmental Sciences at the University of Illinois at Urbana-Champaign
Series/Report:OFOR Working Paper Series, no. 00-01
Genre:Working / Discussion Paper
Type:Text
Language:English
URI:http://hdl.handle.net/2142/4020
Publication Status:published or submitted for publication
Peer Reviewed:not peer reviewed
Date Available in IDEALS:2008-03-17


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