Search results
Results from the WOW.Com Content Network
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 ...
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":
Some examples of basis risks are: Treasury bill futures being hedged by two year bonds, there lies the risk of not fluctuating as desired. A foreign currency exchange rate (FX) hedge using a non-deliverable forward contract (NDF): the NDF fixing might vary substantially from the actual available spot rate on the market on fixing date.
Stack in Macintosh, one of a collection of documents created with HyperCard (as in a stack of virtual cards) Stack in LiveCode, one of a collection of program scripts created with LiveCode's Transcript programming language; Call stack, stack data structure that stores information about the active subroutines of a computer program
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 ...
Although technical systematic systems are more common, there are also systems using fundamental data such as those in equity long:short hedge funds and GTAA funds. Systematic trading includes both high frequency trading ( HFT , sometimes called algorithmic trading ) and slower types of investment such as systematic trend following.
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 ...