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.
The process of scaling option hedges attempts to achieve delta neutral hedges. A true delta neutral hedge would achieve perfect dollar equivalency and thus a perfect hedge.