Hedging: Difference between revisions
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Traditionally hedging refers to the process whereby a firm uses financial instruments (such as forward contracts, futures contracts or options) or other techniques to reduce the impact of fluctuations in such factors as the market price of credit, foreign exchange rates, or commodity prices on its profits or corporate value. | Traditionally hedging refers to the process whereby a firm uses financial instruments (such as forward contracts, futures contracts or options) or other techniques to reduce the impact of fluctuations in such factors as the market price of credit, foreign exchange rates, or commodity prices on its profits or corporate value. | ||
The application of hedging techniques has been extended to the management of many other risks including for example inflation and longevity risk arising in pension funds. | |||
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*[http://www.treasurers.org/node/4592 Falling foul of currency hedging, John Grout, ACT 2009] | *[http://www.treasurers.org/node/4592 Falling foul of currency hedging, John Grout, ACT 2009] | ||
*[http://www.treasurers.org/node/689 | *[http://www.treasurers.org/node/689 Interest rate hedging: demand the proof, The Treasurer, 2008] | ||
[[Category:Interest_Rate_Risk]] | |||
Revision as of 05:41, 4 October 2013
Traditionally hedging refers to the process whereby a firm uses financial instruments (such as forward contracts, futures contracts or options) or other techniques to reduce the impact of fluctuations in such factors as the market price of credit, foreign exchange rates, or commodity prices on its profits or corporate value.
The application of hedging techniques has been extended to the management of many other risks including for example inflation and longevity risk arising in pension funds.
See also
- Arbitrage
- Authorisation
- Authority limits
- Basis risk
- Covering
- Delta hedging
- Foreign exchange forward contract
- Futures
- Hedge accounting
- Inflation risk
- Interest rate guarantee
- Longevity
- Option
- Outturn
- Overhedging
- Pre-settlement risk
- Risk management
- Speculation
- Uncovered
- Underhedging
- Warehousing
