Hedging Behaviour

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Can incomplete information and learning explain a firm's hedging behaviour?

Alberta School of Researcher finds...

  • Hedging is a risk management strategy used by firms to offset potential losses in their business.
  • Firms facing large exposures to commodity prices, exchange rates, or interest rates can use derivatives securities such as futures, options, and swaps to reduce the variability of their cash flows arising from these exposures.
  • Modifying the size of a corporation's risk exposure to be hedged in response to changes in prices is not necessarily the result of managers speculating by incorporating their market views into the firm's hedging policy; it can also be the result of managers optimally using their learning about incomplete price information to vary the volume of their derivative transactions.

This research titled "The role of learning in corporate hedging behavior" by Felipe Aguerrevere is in progress and intended for publishing in a top tier journal.


Felipe Aguerrevere Felipe Aguerrevere studies asset pricing and risk management. In particular, he investigates how competitive interactions among firms affect their real investment decisions and the behaviour of stock return. He is also interested in how a firm financial risk management strategy affects its value. He holds a BS in Mathematics from the Universidad Simon Bolivar, obtained his Masters in Administration from the Institute for Advanced Studies in Administration in Venezuela, and holds a PhD in Finance from the University of California. Felipe is currently the Department Chair and Associate Professor of Finance and Statistical Analysis at the Alberta School of Business.