Risk Reversal


Also found in: Wikipedia.

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.
References in periodicals archive ?
Notable trades hit the market just before 1:50PM ET on NYSE-Arca, with a buyer of 937 Oct 70 calls for $6.50, followed by a bullish risk reversal, also in October, where a trader customer bought 1211 Oct 75 calls to sell Oct 60 puts for a net $3 debit.
Unit root tests, presented in the Appendix, indicated a unit root for the BRL risk reversal. For the other currency returns and risk reversals, tests indicated stationarity, and therefore entered the VAR in levels, while for the BRL the risk reversal entered the VAR in first differences.
This risk reversal occurred much sooner than the 15 years predicted in a 2004 report by the Surgeon General.
"Medical care savings from workplace wellness programs will increase with time given that more eligible wellness program members participate, effective control of heightened risk factors improves, and greater risk reversal can be achieved," the report says.
- 25-Delta Risk Reversal, the most widely used parameter in gauging market direction
Risk Reversal (9.04) tends to find at least one too good too often, but he is threatening to make his mark in A4 grade and is fancied to hit the target in this particular event.
"There was a bit of risk reversal ahead of the G20 meeting," said a currency trader based in London.
We present a diagonal risk reversal on Gazprom, which would benefit from a short-term market surge.
The "less than full" risk reversal following treatment reinitiation in the drug conservation group could be a consequence of a lower average CD4 cell count and the increased number of patients with detectable viral load, which was likely associated with a failure to resume continuous therapy as recommended, Dr.
Entering into a risk reversal contract means buying a call option with a high exercise price and selling a put option with a low exercise price.