Neutral hedge

Neutral hedge

Hedge that is expected to yield a dollar-neutral result of the combined position, regardless of price change in any part of the hedge securities. For any convertible trading at a premium, this ratio is less than 100%. The higher the convertible premium, the lower a ratio must be to be neutral. See: Delta.

Neutral Hedge

A series of positions and offsetting positions on a security the results in a risk-free return. See also: Compound option.
References in periodicals archive ?
As pointed out by Bakshi, Cao, and Chen (1997), the inclusion of another option in the delta-vega neutral hedge may not only neutralize the volatility risk but also reduce the remaining gamma risk in the hedging portfolio.