Summary of Does Hedging with Derivatives Reduce the Market’s Perception of Credit Risk?
Looking for the report?
We have the summary! Get the key insights in just 5 minutes.
Warren Buffett has famously characterized derivatives as “financial weapons of mass destruction.” That almost proved to be the case when their use in the run-up to the 2008 financial crisis threatened to bring down the global economy. But derivatives also can mitigate firm risk. Economists Sriya Anbil, Alessio Saretto and Heather Tookes examine whether the market imposes a penalty on companies that don’t use their hedge positions for purely financial management purposes. Although technical, their report contains some good input that getAbstract expects financial managers and investors will find useful.
In this summary, you will learn
- What impact a firm’s use of derivatives has on its credit spreads,
- Why the market differentiates between a company’s use of derivatives for hedging and nonhedging purposes, and
- What accounts for this market distinction.
About the Authors
Sriya Anbil is an economist with the Board of Governors of the Federal Reserve. Alessio Saretto is an assistant professor of finance at the University of Texas at Dallas. Heather Tookes is a professor of finance at the Yale School of Management.
Comment on this summary
Customers who read this summary also read
Lasse Heje Pedersen
Princeton UP, 2015
Norton Reamer and Jesse Downing
Columbia UP, 2016
René M. Stulz
Federal Reserve Bank of New York, 2016
Vernon Silver and Elisa Martinuzzi
Bloomberg Businessweek , 2017