Liquidity Hedging with Futures and Forward Contracts

We present a model for developing hedging strategies using both futures and forward contracts and issuing risky debt. A financially constrained firm with limited cash balance must hedge its liquidity with both futures and forward contracts and issue risky debt to support its long-term operations. The firm can issue a minimal amount of risky debt by adding forward contracts into hedging and increase its value higher than that when hedging with only futures contracts. We show numerically that hedging with both futures and forward contracts allows the firm to issue minimal risky debt in increasing its firm value

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Year of publication:	2015
Authors:	Shin, Yong Jae
Other Persons:	Pyo, Unyong (contributor)
Publisher:	[2015]: [S.l.] : SSRN
Subject:	Hedging \| Theorie \| Theory \| Derivat \| Derivative \| Warenbörse \| Commodity exchange \| Liquidität \| Liquidity

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