Hedging Revisited: Resolving Contractual Conflict

Pennings, Joost M.E.; Leuthold, Raymond M.

Permalink

https://hdl.handle.net/2142/4020 Copy

Description

Title

Hedging Revisited: Resolving Contractual Conflict

Author(s)

• Pennings, Joost M.E.
• Leuthold, Raymond M.

Issue Date

2000-01

Keyword(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.

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 Name or Number

OFOR Working Paper Series, no. 00-01

Type of Resource

text

Language

en

Permalink

http://hdl.handle.net/2142/4020

Owning Collections