eprintid: 16480
rev_number: 29
eprint_status: archive
userid: 1482
importid: 105
dir: disk0/00/01/64/80
datestamp: 2015-03-16 14:40:37
lastmod: 2021-04-02 15:49:18
status_changed: 2018-04-10 13:11:03
type: article
succeeds: 15366
metadata_visibility: show
creators_name: Amaya, Diego
creators_name: Gauthier, Geneviève
creators_name: Léautier, Thomas-Olivier
creators_idrefppn: 121302369
creators_affiliation: UQAM
creators_affiliation: HEC Montréal
creators_affiliation: TSE,IAE
title: Dynamic risk management
ispublished: pub
subjects: subjects_ECO
subjects: subjects_GESTION4
subjects: subjects_GESTION6
abstract: This article develops a dynamic risk management model to determine a firm's optimal risk management strategy. This strategy has two elements. First, for low-leverage values, the firm fully hedges its operating cash flow exposure, due to the convexity of its cost of capital. When leverage exceeds a very high threshold, the firm gambles for resurrection and stops hedging. Second, the firm manages its capital structure through dividend distributions and investment. When leverage is low, the firm replaces depreciated assets, fully invests in opportunities if they arise, and distribute dividends, all of these together to achieve its optimal capital structure. As leverage increases, the firm stops paying dividends, while fully investing. After a certain leverage, the firm also reduces investment until it stops investing completely. The model predictions are consistent with empirical observations
date: 2015-06
date_type: published
publisher: Wiley
id_number: 10.1111/jori.12025
official_url: http://tse-fr.eu/pub/27659
sub_title: investment, capital structure, and hedging in the presence of financial frictions.
faculty: tse
divisions: tse
divisions: CRM
keywords: Hedging (Finance)
keywords: Capital costs
keywords: investments
keywords: Capital structure
keywords: Financial risk management
language: en
has_fulltext: TRUE
doi: 10.1111/jori.12025
subjectsJEL: JEL_C61
subjectsJEL: JEL_G32
view_date_year: 2015
full_text_status: public
publication: Journal of Risk and Insurance
volume: vol. 82
number: n° 2
pagerange: 359-399
refereed: TRUE
issn: 0022-4367
oai_identifier: oai:tse-fr.eu:27659
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oai_lastmod: 2019-01-23T12:28:02Z
oai_set: tse
oai_set: ut1c
site: ut1
citation:   Amaya, Diego, Gauthier, Geneviève and Léautier, Thomas-Olivier <https://www.idref.fr/121302369>  (2015)  Dynamic risk management: investment, capital structure, and hedging in the presence of financial frictions.   Journal of Risk and Insurance, vol. 82 (n° 2).  pp. 359-399.       
document_url: https://publications.ut-capitole.fr/id/eprint/16480/1/wp_idei_737.pdf