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The case is about an Indian company hedging soya oil price risk in the US futures market instead of in the Indian market to take advantage of better liquidity and wider choice of hedging instruments there. A stable long run relationship (cointegration) between the two markets appeared to make the cross border hedge viable, but hedge accounting considerations appeared to stand in the way.
Keywords:
Hedging,
Liquidity,
Commodity Trading,
Futures Contracts,
Cointegration,
Roll Risk,
Oil,
Large
© 2013 by the Indian Institute of Management, Ahmedabad
2013
Indian Institute of Management, Ahmedabad
Licensed re-use rights only. Cases of the Indian Institute of Management, Ahmedabad, are prepared as a basis for classroom discussion. They are not designed to present illustrations of either correct or incorrect handling of administrative problems.
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