Deal-contingent hedging (linking the settlement of a vanilla hedging instrument to the success or failure of the underlying transaction) has evolved from an efficient way of mitigating foreign-exchange risk between the signing and closing of a cross-border M&A transaction into an option for hedging interest-rate, inflation and even commodities risk.
Transactions where a market dislocation could endanger the liquidity of the company or negatively affect the economics of the underlying transaction are simply too risky to be left unhedged.
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