Hedge: related pages

Covered interest arbitrage

An arbitrage strategy that exploits inconsistencies between currency depreciation and differences in interest rates.

Uncovered interest arbitrage

A combination of trades that makes a profit from an inconsistency between exchange rate differentials and the forward premium (discount) on a currency.

Black-Scholes

The most widely used method of option valuation. More complex models are sometimes necessary as it uses a number of simplifying assumptions.

Delta hedging

The delta of a derivative can be used to hedge a holding of the derivative with a position in the underlying security or vice-versa.

Gamma hedging

A hedge constructed using both the delta and gamma of a portfolio. A gamma hedge needs less frequent re-balancing than a delta hedge.

Market neutral

A market neutral portfolio is one that is fully hedged against the impact of market movements.

Index futures

A contract for difference on the value of an index; a derivative that offers geared access to movements in the market.