Eﬃciency or resiliency? Corporate choice between ﬁnancial and operational hedging

MENGELOLA RESIKO DENGAN PRODUK DERIVATIF

Jurnal Kajian Akuntansi dan Auditing ◽

10.37301/jkaa.v0i0.5365 ◽

2008 ◽

Author(s):

Dandes Rifa

Keyword(s):

Risk Management ◽

Value At Risk ◽

Foreign Currency ◽

Balance Sheet ◽

Cash Flows ◽

Market Risks ◽

Hedging Strategies ◽

Operational Hedging ◽

Potential Risks ◽

Derivative Products

The main objective of risk management is to minimize the potential for losses (risk) arising from unexpected changes in currency rates, credit, commodities and equities. One of the risks faced by companies is market risk (value at risk). This article aims to explain that risk management can be one of them by using derivative products. Derivative transactions is very useful for business people who want to hedge (hedging) against a commodity, which always experience price changes from time to time. There are three strategies that can be used to hedge the balance sheet hedging strategy, operational hedging strategies and contractual hedging strategies. Staregi contractual hedging is a form of protection that is done by forming a contractual hedging instruments in order to provide greater flexibility to managers in managing the potential risks faced by foreign currency. Most of these contractual hedging instrument in the form of derivative products. The management can enhance shareholder value by controlling risk. -Party investors and other interested parties hope that the financial manager is able to identify and manage market risks to be faced. If the value of the firm equals the present value of future cash flows, then risk management can be justified.

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Is operational hedging a substitute for or a complement to financial hedging?

Journal of Corporate Finance ◽

10.1016/j.jcorpfin.2005.09.003 ◽

2006 ◽

Vol 12 (4) ◽

pp. 834-853 ◽

Cited By ~ 101

Author(s):

Young Sang Kim ◽

Ike Mathur ◽

Jouahn Nam

Keyword(s):

Operational Hedging ◽

Financial Hedging

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The value effect of operational hedging: Evidence from foreign takeovers

Finance ◽

10.3917/fina.343.0007 ◽

2013 ◽

Vol 34 (3) ◽

pp. 7

Author(s):

Nihat Aktas ◽

Jean-Gabriel Cousin ◽

Jun Yao (Chris) Zhang

Keyword(s):

Operational Hedging ◽

Value Effect

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Operational Hedging Strategies to Overcome Financial Constraints during Clean Technology Start-Up and Growth

Small and Medium Enterprises ◽

10.4018/978-1-4666-3886-0.ch051 ◽

2013 ◽

pp. 1044-1063

Author(s):

S. Sinan Erzurumlu ◽

Fehmi Tanrisever ◽

Nitin Joglekar

Keyword(s):

Marginal Cost ◽

Cost Of Capital ◽

Clean Technology ◽

Growth Potential ◽

Multiple Sources ◽

Revenue Growth ◽

Hedging Strategies ◽

Positive Externalities ◽

Start Up ◽

Operational Hedging

Clean technology startups face multiple sources of uncertainty, and require specialized knowhow and longer periods for revenue growth than their counterparts in other industries. These startups require large investments and have been hit hard during the current credit squeeze. On the other hand, clean technologies create important positive externalities for the economy. Hence, loan guarantees and other incentive schemes are being developed that are conditioned upon operational benchmarks. The authors offer a framework to establish the extent wherein operational hedging can reduce risk and increase the probability of obtaining financing. They examine a variety of evidence, ranging from production outsourcing to creation of joint ventures, to posit that operational hedging may affect both the marginal cost of capital and the marginal return on investment through mitigating the informational problems in the market. However, operational hedging may not be an effective strategy in all settings: the decision for creation of such hedges ought to weigh the benefits of reduced marginal cost of capital and the opportunity cost of reduced future growth potential against a status quo.

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