Managerial hedging by nonexclusive equity swaps can reduce ex post incentive of the contract，and affect the firm value and risk thereafter． Under the assumption that the manager can affect both the firm value and firm risk simultaneously，we analyze dynamic game equilibrium of the incentive contract and nonexclusive equity swaps contract． The results indicate that when the efficiency of the manager’s effort exceeds a key point，hedging will not reduce the incentive.Otherwise，the degree of reduced equilibrium incentive is decreasing with the cost of effort，risk aversion of trading party and trading cost，but is increasing with the cost of risk control，the capability and risk aversion of the manager． The optimal incentive is decreasing with both costs of effort and risk control，the risk aversions of the manager and trading party，and the trading cost; Further，we find the optimal trading size is not always increasing with risk aversion of managers and the incentive in the presence of endogenous firm risk． Finally，with the practice of stockbased compensation，we illustrate the meaning and importance of our research．