Simultaneous output and input hedging: a decision analysis

Purpose – The purpose of this paper is to present a realistic hedging model. Design/methodology/approach – The paper uses a general utility function, general distributions, and a multiple‐input technology. Findings – The study finds that the impact of one or both risks on the optimal output, hedge, or hedge ratio is determined by the market structure of one or both forward pieces. Originality/value – This is the first paper that uses a general, complete, and realistic hedging model.