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https://doi.org/10.1023/A:1009790704572

has been cited by the following article:

• TITLE: A Review of Corporate Hedging Models and Their Relevance in Corporate Finance

  AUTHORS: Pankaj Gupta

  KEYWORDS: Corporate Hedging Models, Capital Structure, Investment Decision

  JOURNAL NAME: Theoretical Economics Letters, Vol.7 No.2, February 3, 2017

  ABSTRACT: In this paper, a review of theoretical literature of models providing rational of corporate hedging is done and also addresses the corporate finance issues such as financing and investment. As per definition, hedging is either an insurance contract or an activity reducing the correlation between value and random variable linked with the derivative purchase. It is found that, when considering the modern finance theory after relaxing the assumptions made by Modigliani & Miller, the corporate hedging reduces several costs such as agency cost, distress cost and cost of debt. Also, hedging models are explained reducing the adverse selection problem. An integrated approach based models are also present in the review.