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Article: DERIVATIVES AND CORPORATE RISK MANAGEMENT: PARTICIPATION AND VOLUME DECISIONS IN THE INSURANCE INDUSTRY.
- Article from:
- Journal of Risk and Insurance
- Article date:
- March 1, 2001
- Author:
CopyrightCOPYRIGHT 2001 American Risk and Insurance Association, Inc. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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ABSTRACT
In this article, the authors analyze the derivatives holdings of U.S. insurers to empirically investigate the general hypotheses developed in the financial literature to explain why widely held, value-maximizing firms engage in risk management. The authors also develop a new hypothesis suggesting that although measures of risk and illiquidity will be positively associated with an insurer's decision to engage in risk management, these same measures of risk will be negatively related to the volume of hedging for the set of firms who choose to hedge using derivatives. The authors' analysis provides considerable support for general hypotheses about hedging ...