HEDGING POLICIES

Essay specific features

 

Issue:

Business

 

Written by:

Michael F

 

Date added:

September 15, 2012

 

Level:

University

 

Grade:

A

 

No of pages / words:

6 / 1601

 

Was viewed:

4865 times

 

Rating of current essay:

 
Essay content:

If the marginal tax rates are the increasing function of the firms pre-tax value, then as long as the cost of the hedging is not too high, firms can increase their expected post-tax value if they can reduce the variability of their pre-tax values by hedging. It implies that, when there is a convex tax function, volatility of income provides low tax payments in some periods while it leads to high tax payments in other periods and this situation causes firm to pay more than it would pay on a stable stream of income...
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It implies that, when there is a convex tax function, volatility of income provides low tax payments in some periods while it leads to high tax payments in other periods and this situation causes firm to pay more than it would pay on a stable stream of income. Firms will have more incentive to hedge as the convexity of the tax function...
displayed 300 characters

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