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Finance and Financial Management

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2003

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Two Essays On Corporate Hedging: The Choice Of Instruments And Methods, Pinghsun Huang Jan 2003

Two Essays On Corporate Hedging: The Choice Of Instruments And Methods, Pinghsun Huang

LSU Doctoral Dissertations

This dissertation examines corporate use of derivative instruments and multi-period hedging methods. It studies the use of linear (e.g. futures) and nonlinear (e.g. options) derivatives in a sample of 382 U.S. non-financial firms (920 firm-year observations) between 1992 and 1996. It also measures the performance of stacked hedge techniques with applications to three investment assets (heating oil, light crude oil, and unleaded gasoline) and to three commercial commodities (British Pound, Deutsche Mark, and Swiss Franc). In a stacked hedge, corporations hedge the long-term exposures by repeatedly rolling nearby futures contracts until settlement. Analyzing the 382 firms, I find that both …