Glossary

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H

hedge

To protect a position or an entire portfolio against an adverse market development.

Hedge

This means to limit. A hedge transaction is a hedging activity to reduce losses, which can arise through adverse rate or price developments. Anyone who has a position in the spot market and who hedges an opposed futures position against adverse prise or rate development is described as a hedger.
The option to hedge against risks is the actual reason of origin and the authorisation of existence of futures financial tools such as a hedge transaction. Because with option certificates, options and futures can be set at declining prices, it is, for example, possible to hedge an existing share portfolio against a price loss.

Hedge Funds

Hedge funds are highly speculative funds, which mainly invest their plan assets in financial derivatives such as options, futures or futures transactions. Through the leverage of such investment tools, which is frequently further reinforced through credit financing, an above-average profit should be produced in the short-term.

Hedge Ratio

The number of contracts, which are necessary to hedge a position.

Hedge Transaction

A futures transaction, which is concluded to protect against potential losses through price changes in the trade of goods, foreign currency and securities.

Hedger

A market participant, who looks to hedge against market risks using futures and options.

Hedging

A futures transaction, which is concluded to protect against potential losses through price changes in the trade of goods, foreign currency and securities.

Historical Volatility

Volatility, which is based on the historical price fluctuations.

Horizontal Spread

An options strategy comprising calls or puts with the same exercise price whereby the options which expiry soon are written and the options with a later expiry date are bought.

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