I’m reading from Kalpan Schweser and it says that :
- If the benefits from hedging are high, then the firm has to consider whether the investors can hedge the risk at lower cost than the firm. If not, then it is appropriate for the firm to hedge the risk. If yes, then the firm needs to consider whether benefits will persist. If not, then it is appropriate for the firm to hedge. If so, investors should hedge the risk, and it is not appropriate for the firm to hedge.
Can someone explain this to me ?