A hedging strategy is intended to eliminate the exposure of the practitioner that holds a short or long position in a financial derivative security via a portfolio that replicates pointwise the value of the derivative at the maturity time T (see, for example, Hull 2003). In practice, trading times and observation times of market prices are discrete and trading occurs in incomplete markets. Any of these motives suffice to render the hedging strategies imperfect, so that a hedging error eT arises.
- Regulators to scrutinise CCP default auctions
- People moves: Bank of America names new Apac chiefs, Wilkinson leaves LGIM, Lloyds loses Coutte, and more
- VAR surges, revenues tank at French banks hurt by volatility
- Swaps data: SOFR volume and margin insights
- A rush on Libor fallbacks to head off holdouts