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Risk Management for commodity consumers -A study of the Airline industry-

Larsson, Anthon and Hansson, Thomas (2007)
Department of Business Administration
Abstract
The aim of this study is two folded. We wish to investigate if there is a value premium from hedging jet fuel exposure for American and European airlines. We also seek to answer if airlines can affect their probability to default by using Risk Management. During the period 2003 – 2006 there existed a value premium for airlines that hedged their expected future consumption of jet fuel. This premium has, over the 4 year period, on average been 17 percent. There is no support for the theory stating that the value creation form derivative hedging comes from a decrease in the expected cost of default. The value creation is derived from the classification of jet fuel as a non-core risk.
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author
Larsson, Anthon and Hansson, Thomas
supervisor
organization
year
type
H1 - Master's Degree (One Year)
subject
keywords
Risk Management, Hedging, Credit Default, Tobin’s Q, KMV, Leverage, Capital Structure, Prudent Firm Theory, Management of enterprises, Företagsledning, management
language
Swedish
id
1339313
date added to LUP
2007-06-04 00:00:00
date last changed
2012-04-02 16:32:22
@misc{1339313,
  abstract     = {The aim of this study is two folded. We wish to investigate if there is a value premium from hedging jet fuel exposure for American and European airlines. We also seek to answer if airlines can affect their probability to default by using Risk Management. During the period 2003 – 2006 there existed a value premium for airlines that hedged their expected future consumption of jet fuel. This premium has, over the 4 year period, on average been 17 percent. There is no support for the theory stating that the value creation form derivative hedging comes from a decrease in the expected cost of default. The value creation is derived from the classification of jet fuel as a non-core risk.},
  author       = {Larsson, Anthon and Hansson, Thomas},
  keyword      = {Risk Management,Hedging,Credit Default,Tobin’s Q,KMV,Leverage,Capital Structure,Prudent Firm Theory,Management of enterprises,Företagsledning, management},
  language     = {swe},
  note         = {Student Paper},
  title        = {Risk Management for commodity consumers -A study of the Airline industry-},
  year         = {2007},
}