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Definition of Hedge
A securities transaction that reduces or offsets the risk on an existing
A transaction that reduces the risk of an investment.
A protection against borrower fallout risk in the mortgage pipeline.
Strategies that involve a position in an option as well as a position in the
A dynamic hedging strategy using options with continuous adjustment of the number of options
A fund that may employ a variety of techniques to enhance returns, such as both buying and
Excess inventories kept on hand as a buffer against contingent
The ratio of volatility of the portfolio to be hedged and the return of the volatility of the
A portfolio consisting of the long position in the stock and the short position in the call
The purchase of a futures contract(s) in anticipation of actual purchases in the cash market. Used
The use of borrowing and lending transactions in foreign currencies to lock in the
A financial result in which the profit and loss from the underlying asset and the hedge position
Related: short hedge.
The sale of a futures contract(s) to eliminate or lessen the possible decline in value ownership of
The uncertainty about the basis at the time a hedge may be lifted. Hedging substitutes basis risk for
A strategy that involves writing a call option on securities that the investor
A portfolio manager invests dollars in an instrument denominated in a foreign
The practice of hedging with a futures contract that is different from the underlying being
Currency risk sharing
An agreement by the parties to a transaction to share the currency risk associated with
Also called the hedge ratio, the ratio of the change in price of a call option to the change in price of the
A strategy that involves rebalancing hedge positions as market conditions change; a
Slang for a hedge fund.
A strategy designed to reduce investment risk using call options, put options, short selling, or futures
Demands for securities to hedge particular sources of consumption risk, beyond the usual
Naked option strategies
An unhedged strategy making exclusive use of one of the following: Long call
Option not to deliver
In the mortgage pipeline, an additional hedge placed in tandem with the forward or
Protective put buying strategy
A strategy that involves buying a put option on the underlying security that is
This security gives investors the right to sell (or put) fixed number of shares at a fixed price within
Risk controlled arbitrage
A self-funding, self-hedged series of transactions that generally utilize mortgage
Structured arbitrage transaction
A self-funding, self-hedged series of transactions that usually utilize
If the average maturity of a bank's liabilities is less than that of its assets, it is said to be
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