Permanent URL to this publication: http://dx.doi.org/10.5167/uzh-54323
Rochet, Jean-Charles; Villeneuve, Stéphane (2011). Liquidity management and corporate demand for hedgingand insurance. Journal of Financial Intermediation, 20(3):303-323.
View at publisher
We analyze the demand for hedging and insurance by a firm facingcash-flow risks. We study how the firm’s liquidity managementpolicy interacts with two types of risk: a Brownian risk that canbe hedged through a financial derivative, and a Poisson risk thatcan be insured by an insurance contract. We find that the patternsof insurance and hedging decisions are pole apart: cash-poor firmsshould hedge but not insure, whereas the opposite is true for cashrichfirms. We also find non-monotonic effects of profitability. Thismay explain the mixed findings of empirical studies on corporatedemand for hedging and insurance.
235 downloads since deposited on 16 Jan 2012
20 downloads since 12 months
|Item Type:||Journal Article, refereed, original work|
|Communities & Collections:||03 Faculty of Economics > Department of Banking and Finance|
|Dewey Decimal Classification:||330 Economics|
|Deposited On:||16 Jan 2012 15:36|
|Last Modified:||05 Apr 2016 15:20|
|Other Identification Number:||merlin-id:6039|
Users (please log in): suggest update or correction for this item
Repository Staff Only: item control page