Canadian Company gives a Million $$$ to Romney

[ivwshane]

That is a survey of Fortune 500 corporations, and I bet the major use is hedging currencies and commodities.

Michael

It gives details right in the article:

Usage of commodity, equity and credit derivatives is more concentrated among specific industries. While multinational companies across all industries use derivatives to manage foreign exchange and interest rate risk, the use of commodity derivatives is more limited, being concentrated among utilities (83 percent), companies involved in basic materials (79 percent) and financial services companies (63 percent). Not surprisingly, financial services companies are the heaviest users of credit and equity derivatives, since much of their inherent business risk is concentrated in those areas.

 

[Michael]

There are an enormous number of corporations in the USA and I can pretty much guarantee that almost none of them use derivatives. I may be under-counting farms, they often use futures for the crops or animals they are raising.

The article detail spells out normal derivatives for multi-nationals very well.

Michael

 

[ivwshane]

There are an enormous number of corporations in the USA and I can pretty much guarantee that almost none of them use derivatives. I may be under-counting farms, they often use futures for the crops or animals they are raising.

The article detail spells out normal derivatives for multi-nationals very well.

Michael

We have no way to know so...

 

[Michael]

I am on a plane about to leave Bangkok for home (Shanghai), so it is a little hard for me to look up. However, it is highly logical that they do not. A fairly high number of corporations are dormant. A very big number are special purpose vehicles meant to hold an asset or for a project (construction). Almost all corporations are for small businesses that are highly unlikely to be using derivatives as they don't need to (lots and lots of S-corporations).

So I think that the original comment I replied to can easily be proven to false.

As this thread is not really on derivative use by corporations, we can probably leave it at here. My company hedges currencies and also issued a convertible bond (which by definition has an embedded call option hence is using a derivative). We only use forwards for hedging now but have used options in the past. So count a couple of the corporations in my company structure towards that number. I think over 90% of our corporations do no use derivatives of any form, however. I expect giant multi-nationals like GE are similar.

Michael

 

[lotus503]

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