Underhedging: Difference between revisions
From ACT Wiki
Jump to navigationJump to search
imported>Doug Williamson m (Spacing 14/8/13) |
imported>P.F.cowdell@shu.ac.uk m (Categorise the page) |
||
| Line 8: | Line 8: | ||
* [[Hedging]] | * [[Hedging]] | ||
* [[Overhedging]] | * [[Overhedging]] | ||
[[Category:Risk_Management]] | |||
[[Category:Commodity_Risk]] | |||
[[Category:FX_Risk]] | |||
[[Category:Interest_Rate_Risk]] | |||
[[Category:Managing_Risk]] | |||
Revision as of 14:26, 12 August 2014
Underhedging means hedging an amount less than the total related risk exposure, for example by the use of a derivative instrument with a principal amount of 50% (of the related risk exposure).
The effect of underhedging in this way is to reduce the variability of the net hedged exposure - for example by 50% in this case - but without fixing the whole of the related risk exposure.
