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Article: Financial hedging and competitive strategy for value-maximizing firms under quantity competition

TitleFinancial hedging and competitive strategy for value-maximizing firms under quantity competition
Authors
KeywordsFinancial hedging
Risk management
Games theory
Nash equilibrium
Issue Date2018
PublisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=0254-5330
Citation
Annals of Operations Research, 2018, v. 264 n. 1-2, p. 391-407 How to Cite?
AbstractInspired by the growing use of financial hedging among competitive firms nowadays, we develop a game-theoretical model to investigate the problem of applying financial hedging to improve a firm’s competitive strategy. A distinctive setting of the model is that the firm value is a concave function of the firm profit, which is consistent with the empirical evidences in finance literature. After proving the unique existence of the Nash equilibrium, we examine the effects of financial hedging on the equilibrium and yield some novel results. In particular, our analysis suggests that in a competitive market, financial hedging is not just to protect a firm’s bottom line; perhaps more importantly, effective financial hedging schemes can help increase the firm value by boosting the firm’s production, raising the market share, and improving its profitability.
Persistent Identifierhttp://hdl.handle.net/10722/250542
ISSN
2017 Impact Factor: 1.864
2015 SCImago Journal Rankings: 1.186
ISI Accession Number ID

 

DC FieldValueLanguage
dc.contributor.authorNi, J-
dc.contributor.authorChu, LK-
dc.contributor.authorLi, SD-
dc.date.accessioned2018-01-18T04:28:44Z-
dc.date.available2018-01-18T04:28:44Z-
dc.date.issued2018-
dc.identifier.citationAnnals of Operations Research, 2018, v. 264 n. 1-2, p. 391-407-
dc.identifier.issn0254-5330-
dc.identifier.urihttp://hdl.handle.net/10722/250542-
dc.description.abstractInspired by the growing use of financial hedging among competitive firms nowadays, we develop a game-theoretical model to investigate the problem of applying financial hedging to improve a firm’s competitive strategy. A distinctive setting of the model is that the firm value is a concave function of the firm profit, which is consistent with the empirical evidences in finance literature. After proving the unique existence of the Nash equilibrium, we examine the effects of financial hedging on the equilibrium and yield some novel results. In particular, our analysis suggests that in a competitive market, financial hedging is not just to protect a firm’s bottom line; perhaps more importantly, effective financial hedging schemes can help increase the firm value by boosting the firm’s production, raising the market share, and improving its profitability.-
dc.languageeng-
dc.publisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=0254-5330-
dc.relation.ispartofAnnals of Operations Research-
dc.subjectFinancial hedging-
dc.subjectRisk management-
dc.subjectGames theory-
dc.subjectNash equilibrium-
dc.titleFinancial hedging and competitive strategy for value-maximizing firms under quantity competition-
dc.typeArticle-
dc.identifier.emailChu, LK: lkchu@hku.hk-
dc.identifier.authorityChu, LK=rp00113-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1007/s10479-017-2637-6-
dc.identifier.scopuseid_2-s2.0-85032711101-
dc.identifier.hkuros283983-
dc.identifier.volume264-
dc.identifier.issue1-2-
dc.identifier.spage391-
dc.identifier.epage407-
dc.identifier.isiWOS:000429206500016-
dc.publisher.placeUnited States-

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