Hedging Effectiveness

Hedging Effectiveness

The extent to which hedging an investment actually reduces risk. There are a large number of hedging strategies one can use. For example, one may take a long position on a security and then sell short the same security. However, some strategies may be forms of naive diversification, which reduce hedging effectiveness. In an extreme example, if one buys a stock and then short sells a bond in a completely different industry, one is more likely to increase risk rather than decrease it.
References in periodicals archive ?
Actual results could differ materially from those indicated due to changes in a variety of factors, including, but not limited to, international economic environments, government fiscal and monetary policies, currency exchange rates, currency hedging effectiveness, foreign laws, competitive products, pricing and conditions, loan servicing effectiveness, satisfaction or fulfillment of agreed upon terms and conditions of closing or performance of the proposed joint venture, software integration or development, financial and securities markets in general, other factors generally understood to affect the real estate mortgage market, and other risks detailed from time to time in OCN's reports and filings with the U.
31) The use of annual data implies that the hedging effectiveness of one-year hedge positions is being examined.
With PowerSeller, Superior Mortgage has tools for successful pricing, pipeline data management, builder and master commitment processing, pooling, trade processing, shipping, document tracking, ad hoc reporting and SFAS 133/138 reporting, which demonstrates hedging effectiveness in accordance with generally accepted accounting standards.
Such factors may include, but are not limited to, regulatory considerations regarding new product lines, competitive pressure from other secondary mortgage market participants, shifts in interest rates, changes in projected business volumes, prepayment speeds on mortgage assets, changes in our membership profile or the withdrawal of one or more large members, hedging effectiveness of our assets and liabilities, shifts in demand for our consolidated obligations and general economic conditions.
The system provides lenders with necessary tools for successful pricing, pipeline data management, builder and master commitment processing, pooling, trade processing, pipeline risk management, shipping, document tracking, ad hoc reporting, and SFAS 133/138 reporting, which demonstrates hedging effectiveness in accordance with generally accepted accounting standards.
The system provides users with necessary tools for successful pricing, pipeline data management, builder and master commitment processing, pooling, trade processing, pipeline risk management, shipping, document tracking, ad hoc reporting, and SFAS 133/138 reporting, which demonstrates hedging effectiveness in accordance with generally accepted accounting standards.
Actual results could differ materially from those indicated due to changes in a variety of factors, including, but not limited to, international economic environments, government fiscal and monetary policies, currency exchange rates, currency hedging effectiveness, foreign laws, competitive products, pricing and conditions, loan servicing effectiveness, software integration or development effectiveness, financial and securities markets in general, other factors generally understood to affect the real estate mortgage market, and other risks detailed from time to time in OCN's reports and filings with the U.
Our results show that purchasing gap insurance can generally increase the hedging effectiveness in multiple ways by reducing basis risk, thus increasing shareholder value and, at the same time, lowering shortfall risk.
For explanation of hedging effectiveness, basis risk and derivation of hedge ratio, see, among others, Hull (2012).
Overall, the results are comparable to the baseline results, suggesting that the conclusion made earlier with respect to the larger estimation period still hold in general and in particular the institutional involvement is related to the hedging effectiveness of real estate stocks.
In addition, for any given model the more "exotic" the option, the poorer the hedging effectiveness.
The underlying index, which is derived from the price of a basket of routes, could not hedge well for individual route because hedging effectiveness is directly related to the underlying risk.