Finance study makes case for hedging

Lynn Russo Whylly's picture
Thursday, February 6, 2014

The overuse of financial contracts known as derivatives—which were designed to help companies hedge against risk – was widely blamed for triggering the economic crisis of 2008. None other than Warren Buffet has attacked derivatives as "time bombs—both for the parties that deal in them and the economic system."

But now, for the first time, researchers have found that hedging can increase firm value.

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