If shareholders can hedge for themselves, why do most large firms use derivatives, and when does hedging actually create value?
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View 1: hedging is irrelevant (Modigliani-Miller)
State the argument that a hedge is a zero-NPV transaction diversified shareholders can replicate themselves, and record the practical counterargument about what ordinary shareholders know and can trade.
View 2: hedging creates value
List the benefits the video names: cash on hand for positive-NPV investment, less external finance, focus on core competencies, better performance evaluation, and a lower chance of costly financial distress.
Three gold miners, three policies
Record Homestake's no-hedging policy, American Barrick's aggressive hedging and Battle Mountain's hedge of up to 25%, each with its stated rationale, and the distinction between hedging inputs and hedging output.
Evidence on corporate derivative use
Record Guay and Kothari's 1997 finding (57% of 413 large non-financial firms, hedging only a small part of exposure) and the 2025 figure of 86.6% of non-financial firms using OTC derivatives.