(Difference between pages)
imported>Doug Williamson |
imported>Doug Williamson |
| Line 1: |
Line 1: |
| <i>Risk management</i>.
| | 1. |
|
| |
|
| 1.
| | An agreement between firms to restrict competition to the advantage of the firms and to the disadvantage of consumers. |
|
| |
|
| Two options used in combination as a hedge for an underlying exposure to a market price.
| | May result in a cartel being formed. |
| Collar hedges are more complex structures, compared with a simpler cap option or floor option.
| |
|
| |
|
| 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. In other words the hedger <i>sells</i> an option (in addition to <i>buying</i> the simple cap or floor option).
| |
|
| |
|
| 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.)
| | 2. |
|
| |
|
| 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.
| | More generally, secret agreement for the purpose of improper acts or omissions. |
|
| |
|
| The case where the hedger <i>pays</i> a net premium for the collar is known as a <i>positive cost</i> collar.
| |
|
| |
|
| 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.
| | == See also == |
| | | * [[Cartel]] |
| Collars are also known as <i>cylinders</i>, <i>corridors</i> or <i>range forwards</i>.
| |
| | |
| | |
| 2.
| |
|
| |
|
| The net hedged profile achieved by the use of the two options, in combination with the underlying exposure.
| | [[Category:Accounting,_tax_and_regulation]] |
| | | [[Category:The_business_context]] |
| == See also ==
| |
| * [[Cap]]
| |
| * [[Floor]]
| |
| * [[Interest rate collar]]
| |
| * [[Negative cost collar]]
| |
| * [[Positive cost collar]]
| |
| * [[Zero cost]]
| |
Latest revision as of 19:17, 27 June 2022
1.
An agreement between firms to restrict competition to the advantage of the firms and to the disadvantage of consumers.
May result in a cartel being formed.
2.
More generally, secret agreement for the purpose of improper acts or omissions.
See also
