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Article: Tax asymmetry and futures hedging under liquidity constraints

TitleTax asymmetry and futures hedging under liquidity constraints
Authors
Issue Date2005
PublisherJohn Wiley & Sons Ltd. The Journal's web site is located at http://www3.interscience.wiley.com/cgi-bin/jhome/7976
Citation
Managerial And Decision Economics, 2005, v. 26 n. 4, p. 271-281 How to Cite?
AbstractThis paper examines the optimal futures hedging decision of a firm facing uncertain income that is subject to asymmetric taxation with no loss-offset provisions. All futures contracts are marked to market and require interim cash settlement of gains and losses. The firm is liquidity constrained in that it is forced to prematurely close its futures position on which the interim loss incurred exceeds a threshold level. The liquidity risk created by the interim funding requirement of a futures hedge is shown to proffer the firm perverse incentives, thereby making an under-hedge optimal. This under-hedging result holds irrespective of whether the firm is risk neutral or risk averse. Copyright © 2005 John Wiley & Sons, Ltd.
Persistent Identifierhttp://hdl.handle.net/10722/85735
ISSN
2015 SCImago Journal Rankings: 0.546
References

 

DC FieldValueLanguage
dc.contributor.authorWong, KPen_HK
dc.date.accessioned2010-09-06T09:08:34Z-
dc.date.available2010-09-06T09:08:34Z-
dc.date.issued2005en_HK
dc.identifier.citationManagerial And Decision Economics, 2005, v. 26 n. 4, p. 271-281en_HK
dc.identifier.issn0143-6570en_HK
dc.identifier.urihttp://hdl.handle.net/10722/85735-
dc.description.abstractThis paper examines the optimal futures hedging decision of a firm facing uncertain income that is subject to asymmetric taxation with no loss-offset provisions. All futures contracts are marked to market and require interim cash settlement of gains and losses. The firm is liquidity constrained in that it is forced to prematurely close its futures position on which the interim loss incurred exceeds a threshold level. The liquidity risk created by the interim funding requirement of a futures hedge is shown to proffer the firm perverse incentives, thereby making an under-hedge optimal. This under-hedging result holds irrespective of whether the firm is risk neutral or risk averse. Copyright © 2005 John Wiley & Sons, Ltd.en_HK
dc.languageengen_HK
dc.publisherJohn Wiley & Sons Ltd. The Journal's web site is located at http://www3.interscience.wiley.com/cgi-bin/jhome/7976en_HK
dc.relation.ispartofManagerial and Decision Economicsen_HK
dc.rightsManagerial and Decision Economics. Copyright © John Wiley & Sons Ltd.en_HK
dc.titleTax asymmetry and futures hedging under liquidity constraintsen_HK
dc.typeArticleen_HK
dc.identifier.openurlhttp://library.hku.hk:4550/resserv?sid=HKU:IR&issn=0143-6570&volume=26&spage=271&epage=281&date=2005&atitle=Tax+Asymmetry+and+Futures+Hedging+under+Liquidity+Constraintsen_HK
dc.identifier.emailWong, KP: kpwongc@hkucc.hku.hken_HK
dc.identifier.authorityWong, KP=rp01112en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1002/mde.1223en_HK
dc.identifier.scopuseid_2-s2.0-20744431787en_HK
dc.identifier.hkuros102140en_HK
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-20744431787&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume26en_HK
dc.identifier.issue4en_HK
dc.identifier.spage271en_HK
dc.identifier.epage281en_HK
dc.publisher.placeUnited Kingdomen_HK
dc.identifier.scopusauthoridWong, KP=7404759417en_HK

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