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Dynamic hedging

   Also found in: Wikipedia 0.06 sec.
Dynamic hedging
A strategy that involves rebalancing hedge positions as market conditions change; a strategy that seeks to insure the value of a portfolio using a synthetic put option.


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Second, the dynamic hedging of options positions and certain other risk management techniques lead market participants to buy assets when prices are rising and sell when prices are declining.
For financial institutions and other entities that manage net interest rate or currency risk of their overall asset/liability position, the board is tentatively leaning toward permitting macro- and dynamic hedging under an alternative mark-to-market pool approach.
Under what circumstances should you pursue dynamic hedging policies?
 
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