During the early and mid 1990s, companies – and at least one county – lost millions on derivatives speculations, leading to a rash of bad press and concerns over future losses. But today, derivatives rarely make the news. It’s not that they are in disfavor, says Wharton accounting professor Wayne Guay; it’s that they are used differently in a market that has matured. In a new research paper titled, “How Much Do Firms Hedge with Derivatives?” Guay looks at the risks and functions of different types of derivatives.
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