The Need For Hedging - Deepstash

The Need For Hedging

Risk management through hedging allows companies to borrow from themselves, transferring funds to where they are needed the most.

  • The main objective of risk management is that the company should have cash available for making value-enhancing investments.
  • Companies prefer to fund their investments with internal, retained earnings, and not through any outside equity. External financing is seen as a costly affair.
  • Multiple studies on companies managing risk using hedging strategies reveal that it is almost a zero-sum game and does not insulate them from all kinds of risks.

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