Download pdf
An Analysis on Hedging Strategies of Corporates under Ukraine Conflict
- 1 Department of Mathematics, University College London, London,WC1E 6BT, United Kingdom
* Author to whom correspondence should be addressed.
Abstract
The Russia-Ukraine conflict has precipitated significant market volatility, notably affecting the energy and agricultural sectors. This paper offers a concise analysis of corporate hedging tactics in this tumultuous context. Specifically, it examines the energy sector's reaction to fuel price escalations and supply disruptions, highlighting Trafigura Group's revised risk management strategies utilizing financial derivatives to combat market unpredictability. Concurrently, the paper scrutinizes the Louis Dreyfus Company's (LDC) strategic response within the agricultural domain, acknowledging DC's proactive risk management measures, including asset insurance, alternative operational frameworks, and advanced risk assessment protocols. Additionally, the paper delves into the strategic allocation of gold as a corporate hedging instrument amidst geopolitical strife, evaluating its historical efficacy, crisis performance, and status as a potential financial refuge. The discourse concludes by articulating the imperative for adaptive, ongoing recalibration of corporate hedging strategies, underlining the integration of conventional assets like gold for comprehensive risk management amidst the ongoing Russia-Ukraine crisis.
Keywords
Hedging Strategies, Options, Market Volatility, Corporate Performance
[1]. White, O., Buehler, K., Smit, S., Greenberg, E., Jain, R., Dagorret, G., & Hollis, C. (2023). War in Ukraine: Twelve disruptions changing the world—update. McKinsey & Company. https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/war-in-ukraine-twelve-disruptions-changing-the-world-update
[2]. The State of Food Security and Nutrition in the World 2022. (2022). In FAO eBooks.
[3]. Adolfsen, J. F. (2022). The impact of the war in Ukraine on euro area energy markets. European Central Bank. https://www.ecb.europa.eu/pub/economic-bulletin/focus/2022/html
[4]. Fortune. (2023). Trafigura Group. Fortune. https://fortune.com/company/trafigura-group/global500/
[5]. Trafigura. (2023). 2022 Trafigura Annual Report. https://www.trafigura.com/news-and-insights/publications/financials/ 2022/2022-trafigura-annual-report/
[6]. United Nations. (2022). Global impact of war in Ukraine: Energy crisis. https://unctad.org/system/files/official-document/un-gcrg-ukraine-brief-no-3_en.pdf
[7]. Financial Times. (2022). Oil majors and commodity traders at risk from new sanctions on Russia. https://www.ft.com/content/a486c114-6bb0-47a9-b015-21acdaeecb73
[8]. Statista. (2023). Monthly food price index worldwide from 2000 to 2023. https://www-statista-com.libproxy.ucl.ac.uk/ statistics/ 1111134/ monthly-food-price-index-worldwide/
[9]. Goldman Sachs. (2022). The War in Ukraine Stokes Global Food Inflation. https://www.goldmansachs.com/ intelligence/pages/ the-war-in-ukraine-stokes-global-food-inflation.html
[10]. Louis Dreyfus Company. (2023). Financial report and audited consolidated financial statements 2022. https://www.ldc.com/annual-report-2022/financial-statements/
[11]. Shanghai Futures Exchange. (2017). Study on the Successful Experience of Futures Market by Louis Dreyfus, Futures and Financial Derivatives. https://www.shfe.com.cn/upload/ 20170710/ 1499655420938.pdf
[12]. Statista. (2023). Monthly prices for gold worldwide from January 2014 to September 2023. https://www-statista-com.libproxy.ucl.ac.uk/statistics/673513/monthly-prices-for-gold-worldwide/
[13]. Bloomberg. (2021). Lizette Chapman, Palantir Buys Gold Bars as Hedge Against ‘Black Swan Event’. https://www.bloomberg.com/news/articles/2021-08-17/palantir-buys-51-million-in-gold-bars-accepts-payment-in-gold
[14]. Baur, D. G., & McDermott, T. K. J. (2010). Is gold a safe haven? International evidence. Journal of Banking and Finance, 34(8), 1886–1898.
[15]. Shahzad, S. J. H., Bouri, E., Roubaud, D., & Krištoufek, L. (2020). Safe haven, hedge and diversification for G7 stock markets: Gold versus bitcoin. Economic Modelling, 87, 212–224.
[16]. Baur, D. G., & Lucey, B. M. (2010). Is gold a hedge or a safe haven? An analysis of stocks, bonds and gold. The Financial Review, 45(2), 217–229.
[17]. Baur, D. G., & Glover, K. (2012). The destruction of a safe haven asset? Applied Finance Letters, 1(1), 8-15.
[18]. Hasman, A., & Samartı́N, M. (2008). Information acquisition and financial contagion. Journal of Banking and Finance, 32(10), 2136–2147.
[19]. Klein, T. (2017). Dynamic correlation of precious metals and flight-to-quality in developed markets. Finance Research Letters, 23, 283–290.
Cite this article
Zhao,Z. (2024). An Analysis on Hedging Strategies of Corporates under Ukraine Conflict. Advances in Economics, Management and Political Sciences,79,124-132.
Data availability
The datasets used and/or analyzed during the current study will be available from the authors upon reasonable request.
Disclaimer/Publisher's Note
The statements, opinions and data contained in all publications are solely those of the individual author(s) and contributor(s) and not of EWA Publishing and/or the editor(s). EWA Publishing and/or the editor(s) disclaim responsibility for any injury to people or property resulting from any ideas, methods, instructions or products referred to in the content.
About volume
Volume title: Proceedings of the 3rd International Conference on Business and Policy Studies
© 2024 by the author(s). Licensee EWA Publishing, Oxford, UK. This article is an open access article distributed under the terms and
conditions of the Creative Commons Attribution (CC BY) license. Authors who
publish this series agree to the following terms:
1. Authors retain copyright and grant the series right of first publication with the work simultaneously licensed under a Creative Commons
Attribution License that allows others to share the work with an acknowledgment of the work's authorship and initial publication in this
series.
2. Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the series's published
version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgment of its initial
publication in this series.
3. Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and
during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work (See
Open access policy for details).