Hedge Strategy Development

Managing price risks successfully requires certain methodology that consists of a set of techniques, methods and artifacts that determine the procedure, since there are evidences when misuse of the derivatives leads to huge losses (Kavussanos, 2016). What is more, scholars claim that, on the base of the portfolio theory, combination hedging has been proved to improve risk reduction substantially (Sun et al., 2018). However, risk management nowadays faces the problem of no approved approach and acts intuitively. Speaking about Russian companies, for many of them, price risks remain uncontrolled. This decreases firm’s indexes and badly influence on company’s value for investors. Since in recent years main objectives for companies are mostly connected with financial sustainability, risk managers should not underestimate the role of hedging. Even though companies understand the importance of hedging process, they still face the problem of choosing the right hedging strategy. This research will answer key questions in the process of developing a certain hedging strategy. Furthermore, it will help to get to know how to choose the right hedging strategy. Keywords: Currency and commodity risks; Derivatives; Hedge; Hedging strategy; Price risks management.