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Management article
Reference no. JIBR08-32
Published by:
Allied Business Academies (2009)
Revision date:
in "Journal of International Business Research"
11 pages


Hedging is a strategy that uses two counterbalancing investments in order to minimize the impact of unexpected price fluctuations. Because hedging requires purchasing at least two different investments at the same time, by itself hedging increases the cost of investing. However when a hedging strategy reduces investment risk, less capital and more borrowed funds can be used in the investment process. This greater leverage can be used to increase return. The problem is that the teaching of investment hedging techniques in an undergraduate setting can be challenging. The author illustrates some of the challenge by reviewing hedging tools and discussing the hedging of T-Bill futures. The author further suggests that teaching a 130/30 hedging strategy will be easier for undergraduates to grasp.

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