Ch03 - Hedging Strategies Using Futures Chapter 3...

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Fundamentals of Futures and Options Markets , 6 th Edition, Copyright © John C. Hull 2007 3.1 Hedging Strategies Using Futures Chapter 3
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Fundamentals of Futures and Options Markets , 6 th Edition, Copyright © John C. Hull 2007 3.2 z A long futures hedge is appropriate when you know you will purchase an asset in the future and want to lock in the price z A short futures hedge is appropriate when you know you will sell an asset in the future & want to lock in the price
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Fundamentals of Futures and Options Markets , 6 th Edition, Copyright © John C. Hull 2007 3.3 Arguments in Favor of Hedging Companies should focus on the main business they are in and take steps to minimize risks arising from interest rates, exchange rates, and other market variables
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Fundamentals of Futures and Options Markets , 6 th Edition, Copyright © John C. Hull 2007 3.4 Arguments against Hedging z Shareholders are usually well diversified and can make their own hedging decisions z It may increase risk to hedge when competitors do not z Explaining a situation where there is a loss on the hedge and a gain on the underlying can be difficult
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Ch03 - Hedging Strategies Using Futures Chapter 3...

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