Hedging the Value of Waiting

About this item

Title

Hedging the Value of Waiting

Content partner

University of Canterbury Library

Collection

UC Research Repository

Description

We analyze the optimal hedging policy of a firm that has flexibility in the timing of investment. Conventional wisdom suggests that hedging adds value by alleviating the underinvestment problem associated with capital market frictions. However, our model shows that hedging also adds value by allowing investment to be delayed in circumstances where the same frictions would cause it to commence prematurely. Thus, hedging can have the paradoxical effect of reducing investment. We also show that ...

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Format

Research paper

Research format

Journal article

Date created

2006

Creator

Boyle, G. / Guthrie, G.

URL

http://hdl.handle.net/10092/1974

Related subjects

Fields of Research::340000 Economics / Fields of Research::350000 Commerce, Management, Tourism and Services::350300 Banking, Finance and Investment

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