Ch03HullFundamentals5thEd

Ch03HullFundamentals5thEd - Hedging Strategies Using...

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Fundamentals of Futures and Options Markets , 5 th Edition, Copyright © John C. Hull 2004 3.1 Hedging Strategies Using Futures Chapter 3
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Fundamentals of Futures and Options Markets, 5th Edition, 3.2 A long futures hedge is appropriate when you know you will purchase an asset in the future and want to lock in the price 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, 5th Edition, 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, 5th Edition, 3.4 Arguments against Hedging Shareholders are usually well diversified and can make their own hedging decisions It may increase risk to hedge when competitors do not Explaining a situation where there is a loss on the hedge and a gain on the underlying can be difficult
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This note was uploaded on 10/07/2011 for the course FIN 416 taught by Professor Sankarshanacharya during the Fall '11 term at Ill. Chicago.

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Ch03HullFundamentals5thEd - Hedging Strategies Using...

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