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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.
The rationale behind the above formulation of the Vanna-Volga price is that one can extract the smile cost of an exotic option by measuring the smile cost of a portfolio designed to hedge its Vanna and Volga risks. The reason why one chooses the strategies BF and RR to do this is because they are liquid FX instruments and they carry mainly ...
The superhedging price is a coherent risk measure.The superhedging price of a portfolio (A) is equivalent to the smallest amount necessary to be paid for an admissible portfolio (B) at the current time so that at some specified future time the value of B is at least as great as A.
A hedge fund is a pooled investment fund that holds liquid assets and that makes use of complex trading and risk management techniques to improve investment performance and insulate returns from market risk.
For a cash flow hedge, some of the derivative volatility is placed into a separate component of the entity's equity called the cash flow hedge reserve. Where a hedge relationship is effective (meets the 80%–125% rule), most of the mark-to-market derivative volatility will be offset in the profit and loss account. Hedge accounting entails much ...
Below are the 20 largest hedge funds in the world ranked by discretionary assets under management (AUM) as of mid-2024. Only assets in private funds following hedge fund strategies are counted. Some of these managers also manage public funds and offer non-hedge fund strategies.
Stack machine, an architecture centered around a pushdown stack; Protocol stack, a particular software implementation of a computer networking protocol suite; Solution stack, a group of software systems, increasing in abstraction from bottom to top; Stack-based memory allocation, a memory allocation scheme based on the principle of "last in ...
A related term, delta hedging, is the process of setting or keeping a portfolio as close to delta-neutral as possible. In practice, maintaining a zero delta is very complex because there are risks associated with re-hedging on large movements in the underlying stock's price, and research indicates portfolios tend to have lower cash flows if re ...