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Beta is the hedge ratio of an investment with respect to the stock market. For example, to hedge out the market-risk of a stock with a market beta of 2.0, an investor would short $2,000 in the stock market for every $1,000 invested in the stock. Thus insured, movements of the overall stock market no longer influence the combined position on ...
In the UK, a non-rounded efficiency of 49.13% is used for calculating the gas conversion. In reality, each gas-fired plant has a different fuel efficiency, but 49.13% is used as a standard in the UK market because it provides an easy conversion between gas and power volumes. The spark spread value is therefore the power price minus the gas cost ...
During the 2009-2010 period, the studies for the airline industry have shown the average hedging ratio to be 64%. [citation needed] Especially during the peak stress periods, the ratio tends to increase. Southwest Airlines has tended to hedge a greater portion of its fuel needs as compared to other major U.S. domestic carriers. [3]
The risk parity approach asserts that when asset allocations are adjusted (leveraged or deleveraged) to the same risk level, the risk parity portfolio can achieve a higher Sharpe ratio and can be more resistant to market downturns than the traditional portfolio. Risk parity is vulnerable to significant shifts in correlation regimes, such as ...
A 130–30 fund or a ratio up to 150/50 is a type of collective investment vehicle, often a type of specialty mutual fund, but which allows the fund manager simultaneously to hold both long and short positions on different equities in the fund. [1]
When applied to financial risk management, this implies that firm managers should not hedge risks that investors can hedge for themselves at the same cost. [5] 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 ...
Bailey and López de Prado (2012) [13] show that Sharpe ratios tend to be overstated in the case of hedge funds with short track records. These authors propose a probabilistic version of the Sharpe ratio that takes into account the asymmetry and fat-tails of the returns' distribution.
Energy portal; Crack spread is a term used on the oil industry and futures trading for the differential between the price of crude oil and petroleum products extracted from it. . The spread approximates the profit margin that an oil refinery can expect to make by "cracking" the long-chain hydrocarbons of crude oil into useful shorter-chain petroleum produc