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HARKing (hypothesizing after the results are known) is an acronym coined by social psychologist Norbert Kerr [1] that refers to the questionable research practice of "presenting a post hoc hypothesis in the introduction of a research report as if it were an a priori hypothesis".
A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment. A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, gambles, [1] many types of over-the-counter and derivative products, and futures contracts.
Hedging is an investment strategy that is simple in concept but that can be difficult in execution. The primary uses of hedging strategies are to either lock in a profit or to protect against a...
This notion is captured in the so-called "hedging irrelevance proposition": [16] "In a perfect market, the firm cannot create value by hedging a risk when the price of bearing that risk within the firm is the same as the price of bearing it outside of the firm." In practice, however, financial markets are not likely to be perfect markets.
Testing must be performed on both elements of the hedge relationship to ensure that the risk mitigation value of the hedge would be effectively reflected in the insurees profit and loss ledger. "Effectiveness" measures the strength of this relationship; there are several [2] [3] generally accepted "measures of effectiveness":
The business model of an investment bank differs from a hedge fund in several ways but perhaps the most important is this: The business model of a hedge fund is to make investments and profit off ...
The simplest example of diversification is provided by the proverb "Don't put all your eggs in one basket". Dropping the basket will break all the eggs. Placing each egg in a different basket is more diversified. There is more risk of losing one egg, but less risk of losing all of them. On the other hand, having a lot of baskets may increase costs.
The FRTB revisions address deficiencies relating to the existing [8] Standardised approach and Internal models approach [9] and particularly revisit the following: . The boundary between the "trading book" and the "banking book": [10] i.e. assets intended for active trading; as opposed to assets expected to be held to maturity, usually customer loans, and deposits from retail and corporate ...