Risk Reversal

Also found in: Wikipedia

0.03 sec.

Risk Reversal

1. The sale of a call and the purchase of a put with the exact same terms. One conducts a role reversal when the price for the underlying asset is falling and one wishes to hedge one's risk. A risk reversal reduces profit potential and eliminates it if the underlying asset rises back above the strike price.

2. In currency options, the difference between the delta of a call and the delta of a put. Because delta is a measure of volatility, risk reversal helps one determine the potential return of investing in one as opposed to the other.

Want to thank TFD for its existence? Tell a friend about us, add a link to this page, add the site to iGoogle, or visit the webmaster's page for free fun content.

?Page tools

Printer friendly
Cite / link

Feedback
Add definition

Mentioned in	?		References in periodicals archive	?		Financial browser	?		Full browser	?
No references found			What are Risk Reversals: Risk reversals are the difference in volatility between similar (in expiration and relative strike levels) FX calls and put options. Risk Appetite Stalls But the Dollar and Dow Maintain Trend Through ... by Mena Report Interestingly EUR-USD risk reversals have now inverted in favor of EUR puts instead of EUR calls out to 6-months (page 12), this may reflect hedging of either outright long EUR or short vega positions via the accumulation of EUR puts. Forex Portfolio Manager by Albawaba.com 29-37 risk reversal for downside protection, suggesting that their bullishness is limited. Placing an options collar on Caterpillar (CAT) stock by Jud Pyle / Stockhouse			Rising Bottom Rising Bottoms Rising Market Rising-Coupon Security risk risk adjusted Risk Adjusted Return on Capital Risk Arbitrage Risk Aversion Risk Capital Risk Classes Risk controlled arbitrage Risk Factor Risk Graph Risk Hedge Risk Indexes Risk Lover risk management Risk Manager Risk Neutral risk of loss Risk Premium Risk Premium Approach Risk Profile Risk Ratio Risk Reversal Risk seeker Risk Taker Risk Tolerance Risk Transfer risk versus reward Risk-Adjusted Discount Rate Risk-Adjusted Performance Risk-adjusted profitability Risk-Adjusted Return Risk-Averse Risk-based capital ratio risk-based capital requirement Risk-Free Risk-Free Asset Risk-Free Interest Rate risk-free rate Risk-Free Rate of Return Risk-Free Return Risk-Loving Risk-Neutral Risk-Prone Risk-Return Trade-Off Risk-Return Tradeoff Risk-Reward Ratio Risk-Weighted Assets			Risk Reduction and Environmental Stewardship Risk Reduction and Operations Evaluation Risk Reduction and System Definition Risk Reduction Engineering Laboratory Risk Reduction Event Risk Reduction Factor Risk Reduction Flight Demonstration Risk Reduction Interface Processor Risk Reduction Interval Risk Reduction Measure Risk Reduction Program Risk Reduction Program Contractor Risk Reduction Reports Risk Reduction Steering Group Risk Reduction Strategy Risk Reduction Surgery Risk Reduction Worth Risk Rescue Rating Scale Risk Retention Group Risk Retention Reporter Risk Return Trade-Off Risk Return Trade-Offs Risk Return Tradeoff Risk Return Tradeoffs Risk Reversal Risk Reversals Risk Review Board Risk Reward Basis Risk Reward Ratio Risk Reward Ratio Risk Reward Ratios Risk seeker Risk Seeking Risk Seeking Risk Seeking Risk Seeking Risk Seeking Risk Sensitive Foraging Theory Risk Sermayesi Yatirim Ortakligi Risk Service Contract Risk Sharing Financing Facility Risk Sharing Partner Risk Specific Concentration Risk Specific Dose risk stratification risk taker risk taker risk taker Risk Takers Risk Takers Risk Takers Risk Task Assessment Risk to benefit ratio Risk tolerance Risk tolerance

Financial Dictionary

Free Tools:	For surfers: Free toolbar & extensions \| Word of the Day \| Help For webmasters: Free content \| Linking \| Lookup box \| Double-click lookup

Disclaimer
All content on this website, including dictionary, thesaurus, literature, geography, and other reference data is for informational purposes only. This information should not be considered complete, up to date, and is not intended to be used in place of a visit, consultation, or advice of a legal, medical, or any other professional.