Hedge ratio: Difference between revisions
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imported>Doug Williamson (Updated entry. Source ACT Glossary of terms) |
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The proportion of a hedging instrument required to hedge an underlying position, compared with the amount of the underlying position itself. | The proportion of a hedging instrument required to hedge an underlying position, compared with the amount of the underlying position itself. | ||
So if four options are required to hedge a position of one unit of the underlying asset, the hedge ratio = ¼ = 0.25. | So if four options are required to hedge a position of one unit of the underlying asset, | ||
the hedge ratio = ¼ | |||
= 0.25. | |||
== See also == | == See also == | ||
* [[Dynamic hedging]] | * [[Dynamic hedging]] | ||
Revision as of 16:19, 25 November 2014
The proportion of a hedging instrument required to hedge an underlying position, compared with the amount of the underlying position itself.
So if four options are required to hedge a position of one unit of the underlying asset,
the hedge ratio = ¼
= 0.25.
