Question

Please discuss the definition of future hedging, forward hedging, option hedging, money market hedging and swap hedging. And review exciting literature on whether these five hedgings increases firm value. In 500 words

Answer 1

Ans Definition of Future hedging & 10 Futures Contracts are Sk . one of the most sub groups to hedge risk * it's between two parties to buy or sell an asset at a putable time in the future for Particular Price. Those investors have many goal they use future Contracts to hedge is to perfectly offset their risk. Forword hedgings of is a customize as it is a customized contract between two parties buy or sell an assets for the price of future date. s tectuared it used for hedging or speculation. s its have non. Standardized nature. sits tailored to specific commodity and delivery date. option Hedging. hedging investors to stable the one investment to Postion by strategy used by risk of holding by taking another position

had to hedge deal to hedge against against list be for s it is a great underlying stocks. Money Market hedging it is used in financial Market, foreign exchange risk using money market - Those highy liquid and short-term deals! Is its used in currency transaltions in a argenirations. it is complicated then other forms of foreign Exchange Lediga hodging. s its managing currency. swap hedging as it is used through two parties those Exchange cash flow or liabilites from two different financial instruments, s it is interest Eate swap hedge. s it is a way to help currencey risk. 3 Many Hedged given investers access to foreign investment without any worry about

risk. Currency Exciting hedging literature Pncreases these on whether firm value: - tine (1) Companies face Financial distress when they are cash Shortfall. Them Company want incrusty cash flow then company borrowing cost then company need the cash. 1 2) Investment of Then company with high cash flow volatility face more risks due to unde - investment. Problem. - Componey mostly used and chose investment Project awithout he dying. y company went to croced invetment. V 3) Manage lisk! - Managers makes hedging decisions bose an own risk. 3 hedging will not have relation with fir como In for company vallu.

1 4 Company mange to reduse to taxes. 5 Manage firm size from has large ecomomey scale. then firm afford implementing and mariontaining a kisk Management Programm, & Control variables. y market competition.