Introduction to Corporate Finance

xxiii

CHAPTER 23 INTRODUCTION TO FINANCIAL RISK MANAGEMENT 786

■ WHAT COMPANIES DO: Google’s Earnings Boosted by Hedging Program 786

23-1 Overview of Financial Risk Management 788

23-1a Risk Factors 788

23-1b The Hedging Decision 790

23-2 Forward Contracts 794

23-2a Forward Prices 794

23-2b Currency Forward Contracts 796

23-2c Interest Rate Forward Contracts 799

23-3 Futures Contracts 800

23-3a Hedging with Futures Contracts 804

23-3b Concerns when Using Futures Contracts 804

23-4 Options and Swaps 806

23-4a Options 806

23-4b Swaps 807

23-5 Financial Engineering 811

Summary 812 | Important equations 813 | Key terms 813 | Self-test problems 814 |

Questions 814 | Problems 815

■ MINI CASE Risk Management 817

■ Online Study Tools 817

Smart Video

David Childress, Asset Liability Manager,

Ford Motor Co. | p.789

Keith Woodward, Vice President of Finance,

General Mills | p.790

John Graham, Duke University | p.791

Betty Simkins, Oklahoma State

University | p.809

SMART concepts | p.796

SMART solutions | p.815

Glossary G-1

Names and company index I-1

Subject index I-4

Contents