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| <i>Risk management</i>.
| | A virtual digital currency based on cryptography and peer-to-peer networking, for example Bitcoin. |
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| | Also known as 'crypto-assets'. |
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| Two options used in combination as a hedge for an underlying exposure to a market price.
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| Collar hedges are more complex structures, compared with a simpler cap option or floor option.
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| An advantage of collars for hedging is that they reduce the net premium paid for the hedge. They do this by adding a short option position to the long position in the simple cap or floor.
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| In other words the hedger <i>sells</i> an option (in addition to <i>buying</i> the simple cap or floor option).
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| The premium received by the hedger reduces their net premium payable. The net premium payable is often zero. (This arrangement is called a <i>zero cost</i> collar.)
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| It is also possible - though less common - to construct a <i>negative cost</i> collar, the net premium being <i>receivable</i> by the hedger.
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| The case where the hedger <i>pays</i> a net premium for the collar is known as a <i>positive cost</i> collar.
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| The result of dealing in the combination of two options as a hedge is to ‘collar’ the all-in hedged expense or income achieved within a range which is acceptable to the hedger.
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| Collars are also known as <i>cylinders</i>, <i>corridors</i> or <i>range forwards</i>.
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| | == See also == |
| | * [[Altcoin]] |
| | * [[Bitcoin]] |
| | * [[Blockchain]] |
| | * [[Crypto-assets]] |
| | * [[Ether]] |
| | * [[Fiat currency]] |
| | * [[Gold standard]] |
| | * [[Ripple]] |
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| The net hedged profile achieved by the use of the two options, in combination with the underlying exposure. | | ===Other links=== |
| | [http://www.treasurers.org/node/10047 Peer Pressure, The Treasurer, April 2014] |
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| | | [[Category:Cash_management]] |
| == See also ==
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| * [[Cap]]
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| * [[Floor]]
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| * [[Interest rate collar]]
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| * [[Negative cost collar]]
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| * [[Positive cost collar]]
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| * [[Zero cost]]
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Revision as of 21:58, 15 February 2020
