Niclas Andrén
Head of the Department of Business Administration
How do Firms Hedge in Financial Distress?
Author
Summary, in English
We examine how firms hedge in financial distress. Using hand-collected data from oil and gas producers, we find that these firms hedge oil prices during periods of financial distress. Derivative portfolios in these firms are characterized by short put options. These positions are part of a composite three-way collar strategy that combines buying put options and selling put and call options with differing strike prices. Because liquidity demand varies with the degree of financial distress, the three-way collar strategy preserves incentives for future growth.
Department/s
- Department of Business Administration
- Accounting and Corporate Finance
Publishing year
2022-05-03
Language
English
Pages
1324-1351
Publication/Series
Journal of Futures Markets
Volume
42
Issue
7
Document type
Journal article
Publisher
John Wiley & Sons Inc.
Topic
- Business Administration
Keywords
- Corporate hedging
- risk management
- financial distress
- economic distress
Status
Published
ISBN/ISSN/Other
- ISSN: 1096-9934