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Hedging demands

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Definition of Hedging demands

Hedging Demands Image 1

Hedging demands

demands for securities to hedge particular sources of consumption risk, beyond the usual
mean-variance diversification motivation.



Related Terms:

Cross hedging

The practice of hedging with a futures contract that is different from the underlying being
hedged.


Dynamic hedging

A strategy that involves rebalancing hedge positions as market conditions change; a
strategy that seeks to insure the value of a portfolio using a synthetic put option.


Hedging

A strategy designed to reduce investment risk using call options, put options, short selling, or futures
contracts. A hedge can help lock in existing profits. Its purpose is to reduce the volatility of a portfolio, by
reducing the risk of loss.


Hedging

Reducing one's exposure to risk by buying and selling contracts for future delivery (of foreign currency, for example) at a price that is determined now.


Average (across-day) measures

An estimation of price that uses the average or representative price of a
large number of trades.



Cross-border risk

Refers to the volatility of returns on international investments caused by events associated
with a particular country as opposed to events associated solely with a particular economic or financial agent.


Cross default

A provision under which default on one debt obligation triggers default on another debt
obligation.


Hedging Demands Image 1

Cross holdings

One corporation holds shares in another firm.


Cross rates

The exchange rate between two currencies expressed as the ratio of two foreign exchange rates
that are both expressed in terms of a third currency.


Cross-sectional approach

A statistical methodology applied to a set of firms at a particular point in time.


Crossover rate

The return at which two alternative projects have the same net present value.


Dynamic asset allocation

An asset allocation strategy in which the asset mix is mechanistically shifted in
response to -changing market conditions, as in a portfolio insurance strategy, for example.



 

 

 

 

 

 

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