In finance, hedging means that one investment deliberately reduces the risk of another investment. This is a way to reduce business risks while still making profits from investment.
Hedging is the most common in the foreign exchange market, aiming at avoiding the risk of one-way trading. The so-called single-line trading means buying short positions (or short positions) when you are optimistic about a certain currency, and selling short positions (short positions) when you are bearish on a certain currency. If the judgment is correct, the profit will naturally be more; But if the judgment is wrong, the loss will not be greater than not hedging.
The so-called hedging is to buy a foreign currency at the same time and short it. Besides, we should also sell another currency, that is, short selling. In theory, shorting a currency and shorting a currency should be the same as the silver code, which is the real hedging, otherwise the hedging function cannot be realized if the two sides are different in size.
This is because the world foreign exchange market is based on US dollars. All foreign currencies rise and fall with the US dollar as the relative exchange rate. A strong dollar means a weak foreign currency; If the foreign currency is strong, the dollar will be weak. The rise and fall of the dollar affects the rise and fall of all foreign currencies. Therefore, if you are optimistic about a currency, but want to reduce the risk, you need to sell a bearish currency at the same time. Buy strong currency and sell weak currency. If the estimate is correct, the dollar will weaken and the strong currency bought will rise. Even if the estimate is wrong and the dollar is strong, the currency bought will not fall too much. The weak currency sold has fallen sharply, with less losses and more gains, and it can still be profitable on the whole.
1at the beginning of 990, the Iraq war in the Middle East ended, and the United States became the victorious country. The price of the US dollar rose steadily and strongly, rising against all foreign exchange. At that time, only the Japanese yen was still a strong currency. At that time, shortly after the fall of the Berlin Wall, Germany had just been unified, and the economic differences in East Germany dragged down Germany, and the economy had hidden worries. The political situation in the Soviet Union was unstable, and Gorbachev's position was shaken. At that time, the British economy was also very poor, and interest rates were cut constantly. The Conservative Party was challenged by the Labour Party, so the pound was also weak. After the war, the attraction of Swiss franc as a war refuge declined and it became a weak currency.
If you had bought foreign exchange at that time, you would have made a lot of money by selling pounds, marks and Swiss francs, and at the same time buying yen to short. When the dollar rose, all foreign currencies fell, except the Japanese yen, and all other foreign currencies fell sharply. When the dollar weakens, other currencies will rise slightly, but the yen will rise sharply. Anyway, as long as you hedge in the market at that time, you will make a profit.
During the period of 1997, Soros's quantum fund sold a lot of Thai baht and bought other currencies. Thailand's stock market fell, and the Thai government could no longer maintain the linked exchange rate, resulting in heavy economic losses. And the fund is very profitable. In addition to Thailand, Hong Kong and other countries and regions that maintain currency prices with the linked exchange rate are challenged by hedge funds. The Hong Kong government raised interest rates sharply, reaching 300% in overnight rate, and even used HK$ 654.38+020 billion in foreign exchange reserves to buy a large number of Hong Kong stocks. Finally repel speculators.
The principle of hedging is not limited to the foreign exchange market, but is more commonly used in the foreign exchange market in terms of investment. This principle also applies to the gold market, futures and futures markets.
Purchase hedging, also known as "push hedging", is used to protect the future changes of stock portfolio price. Under this kind of hedging, the hedger buys futures contracts.
For example, the fund manager predicts that the market will rise, so he wants to buy stocks; But if the funds used to buy stocks can't be put in place immediately, he can buy futures indexes, and when the funds are enough, he will sell futures to buy stocks, and the futures income will offset the cost of buying stocks at high prices.
Fund managers will receive investment funds regularly. Before receiving new investment funds, he predicted that there would be a "bull market" in the next few weeks. In this case, he can use the purchase hedge to fix the current price of the stock. If the Hang Seng Index futures due in four weeks are 4,000 points this month, and the fund manager expects to get 1 10,000 USD in three weeks, then he can buy 1 1,000,000 ÷ (4,000× 50 USD) = 5 contracts now.
If his prediction is correct, the market will rise by 5% to 4,200 points, and the income from his liquidation at this time will be (4,200-4,000) × 50 USD× 5 contracts = 50,000 USD. The gains from five futures contracts can be used to make up for the loss of stock price rise. In other words, he can buy stocks at the share price three weeks ago.
Sell hedging, also known as "sell hedging", is used to protect the future decline of stock portfolio price. Under this kind of hedging, when the hedger sells the futures contract, it can fix the future cash selling price and transfer the price risk from the holder of the stock portfolio to the buyer of the futures contract. One case of selling hedging is that investors expect the stock market to fall, but ignore the sale of their stocks; They can short stock index futures to make up for the expected loss of holding stocks.
Suppose an investor holds a stock portfolio, and its risk coefficient (beta) is 1.5, while its present value is100000. Investors are worried about the outcome of the trade talks next week. If the negotiation fails to reach an agreement, it will be bad for the market. Therefore, he wants to fix the present value of the stock portfolio. He used Hang Seng Index futures to protect his investment. The number of contracts required should be equal to the present value of the stock portfolio multiplied by its risk coefficient and divided by the value of each futures contract.
For example, the futures contract price is 4,000 points, the value of each futures contract is 4,000× 50 USD = 200,000 USD, and the coefficient of stock portfolio multiplied by market value is1.5×10000 USD =150000 USD. Therefore, we need150,000 USD/200,000 USD, that is, 75 contracts for hedging. If the negotiation breaks down and the market drops by 2%, the market value of the investor's stock should drop by 65,438+0.5 × 2% = 3%, or $300,000. Hang Seng Index futures will also fall by 2% × 4,000 = 80 points, that is, each contract is 80×50 USD = 4,000 USD. At this time, investors can close their positions and buy back 75 contracts, and get 75 × 4,000 = 300,000, which just offsets the loss of the stock portfolio. Please note that in this example, it is assumed that the stock portfolio falls with the Hang Seng Index as expected, which means that the risk coefficient is accurate. In addition, it is assumed that the basis point or difference between the futures contract and the index remains unchanged.
The emergence of classified index futures may make selling hedging easier to manage than in the past, because investors can control certain market risks. This plays an important role in investing in stocks closely related to a certain sub-index.
Risk hedging refers to a risk management strategy to offset the potential risk loss of basic assets by investing or buying some assets or derivatives that are negatively related to the fluctuation of basic assets. Such as: portfolio, multi-currency settlement, strategic diversification, hedging, etc.
Risk hedging is a very effective method to manage interest rate risk, exchange rate risk, stock risk and commodity risk. Due to the continuous innovation and development of credit derivatives in recent years, risk hedging has also been widely used to manage credit risk. Different from the risk diversification strategy, risk hedging can manage systematic risk and non-systematic risk, and can also reduce the risk to the expected level by adjusting the hedging ratio according to the risk tolerance and preference of investors. The key problem of risk management by using risk hedging strategy lies in the determination of hedging ratio, which is directly related to the effect and cost of risk management.
Risk hedging of commercial banks can be divided into self-hedging and market hedging:
1. The so-called self-hedging means that commercial banks use the hedging characteristics of their balance sheets or some business portfolios with negative returns to hedge their risks.
2. Market hedging refers to hedging risks (also known as residual risks) that cannot be self-hedged through the balance sheet and related business adjustments through the derivatives market.
If you buy a stock at the price of 10 yuan, the stock may rise to 15 yuan in the future, or it may fall to 7 yuan. Your expectation of income is not too high. More importantly, you hope that if the stock falls, your loss will not be as high as 30%. What can you do to reduce the risk of stock falling?
One possible scheme is: you buy a put option of this stock at the same time-an option is a right (not an obligation) that can be exercised in the future. For example, the put option here may be the right to "sell this stock at 9 yuan price one month later"; If the stock price is lower than that of 9 yuan after one month, it can still be sold at the price of 9 yuan, and the issuer of the option must accept it in full; Of course, if the stock price is higher than that of 9 yuan, you will not exercise this right (wouldn't it be better to sell it at a higher price in the market). In view of this option right, the issuer of the option will charge you a certain fee, which is the option fee.
Originally, your stock may bring you 50% profit or 30% loss. When you buy a put option with the strike price of 9 yuan at the same time, the profit and loss situation changes: the possible gains become.
(15 yuan-option fee)/10 yuan
The possible losses are:
(10 yuan -9 yuan+option fee)/10 yuan.
The potential gains and losses have become smaller. By buying put options, you pay a part of the potential benefits, in exchange for avoiding risks.
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