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| Volume 3, No. 1,
April 2004
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A Note on Dual Hedging |
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Donald Lien |
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Department of Economics, University of
Texas—San Antonio, U.S.A. |
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| Abstract |
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Under current Internal Revenue Services
guidelines, gains from futures contracts serving price (quantity)
risk management purposes are treated as ordinary (capital) income.
This paper finds that, although dual hedging opportunities are
available, the asymmetric tax treatment prevents firms from trading
“quantity” futures contracts. |
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Key words:
dual hedging; ordinary income; capital income |
| JEL
classification:
G11 |
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