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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
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JEL classification
:
G11
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