The hedging mode of hedging, why do you want to do hedging

In the book "Quantitative Investment - Strategy and Technology", the hedging trading mode is summarized into four major types, namely: stock index hedging, commodity hedging, statistics and option arbitrage.

Stock index hedging.

Stock index hedging refers to the act of taking advantage of the unreasonable stock index market to participate in stock index and spot market transactions at the same time, or to trade index contracts of different maturities and different (but similar) categories at the same time to earn the price difference. Stock index arbitrage is divided into spot hedging, inter-temporal hedging, inter-market hedging and cross-product hedging.

Commodity hedging.

Similar to stock index hedging, commodities also have a hedging strategy, which is to sell or sell another contract at the same time, and close both contracts at the same time. In terms of trading form, it is somewhat similar to hedging, but hedging is to sell (or sell) physical goods in the spot market and sell (or) contracts in the market at the same time; Arbitrage, on the other hand, only buys and sells contracts in the ** market, and does not involve spot trading. There are four main types of commodity arbitrage: spot hedging, intertemporal hedging, cross-market arbitrage and cross-variety arbitrage.

Statistical hedging. Different from risk-free hedging, statistical hedging is the use of historical statistical laws for arbitrage, which is a kind of risk arbitrage, and the risk lies in whether this historical statistical law will continue to exist in the future for a period of time. The main idea of statistical hedging is to first find out a number of pairs of investment varieties with the best correlation (** or **, etc.), and then find out the long-term equilibrium relationship (cointegration relationship) of each pair of investment varieties, and start to open a position when the price difference of a pair of varieties (the residuals of the cointegration equation) deviates to a certain extent - buy the relatively undervalued varieties, short sell the relatively overvalued varieties, and wait until the spread returns to equilibrium to take profits.

The main contents of statistical hedging include ** pair trading, stock index hedging, securities lending hedging and foreign exchange hedging trading.

Option hedging. Option, also known as option, is a derivative financial instrument produced on the basis of **. In essence, options essentially price rights and obligations separately in the financial field, so that the transferee of the right can exercise its rights within a specified time as to whether or not to carry out the transaction, and the obligated party must perform it.

In the trading of options, the party who buys the option is called the buyer, and the party who buys the option is called the seller; The buyer is the transferee of the rights, and the seller is the obligor who must perform the buyer's rights. The advantage of options is that the return is unlimited while the risk loss is limited, so in many cases, the use of options to replace the short and hedging trades will have a smaller risk and higher yield than simply using the arbitrage.

In finance, hedge refers to an investment that deliberately reduces the risk of another investment. Hedging is a way to reduce business risk while still making a profit on your investment. Generally, hedging is to carry out two ** related, opposite directions, equal amounts, and break-even transactions at the same time.

Hello, this question touches on the concept of structural product design. In response to your question, we structure it in two simplest ways, or related products.

First, to simplify, let's assume that an investment in the U.S.** market involving RMB 1 million is expected to yield 10%; The volatility of USD/CNY is 5%, and in order to avoid this risk, we hedge the exchange rate risk of USD/RMB in the foreign exchange market.

Well, since you have chosen to hedge in another market, there will definitely be a cost.

The first is a foreign exchange forward contract, which sells an equivalent value of a USD/RMB forward foreign exchange contract in the forward foreign exchange market while converting 1 million funds into US dollars. But the problem with this way is that you need a clear time period.

Second, if we choose a leveraged market, we need to calculate the amount of principal required for hedging based on two factors: one is the expected volatility of 5% (liquidation risk), and the other is our hedging object, that is, the total amount of RMB 1 million invested in the U.S. ** market. In order to simplify the problem, we ignore the intermediate calculation process involving leverage and the current exchange rate, so we will convert the 1 million invested in ** into US dollars, and at the same time short (equivalent to selling US dollars, ** RMB) in the leveraged foreign exchange market (equivalent to selling US dollars, ** RMB) equivalent to 1 million RMB USD/RMB contracts (need to be calculated at the current exchange rate).

The advantage of this method is that there is no time period limit, and you can close your position in the leveraged market while recovering your invested funds; However, there is a disadvantage that if the volatility is greater than expected or beyond the tolerance range of the principal, it may form a liquidation, so it is necessary to calculate and make decisions carefully.

There are some other foreign exchange-related market products that can be used, the four major derivatives**, options, forwards, swaps, these are commonly used hedging tools, and even include some combined hedging tools, which are not listed here, I hope it will help you.

Long-term trend investing is very risky.

Some funds are not possible to invest in trends.

There will be more room for development in long-short, neutral strategies, and M&A arbitrage strategies, and there will also be certain development opportunities in capital structure arbitrage strategies.

It's too dangerous not to hedge risk.

Hedging: Investments that reduce risk.

The mortise and tenon structure is the junction between the individual components that coincides with the mortise and tenon joint to form an elastic framework. The old man said that "mortise and tenon ten thousand years prison" is true. Introduction to mortise and tenon structure:

Mortise and tenon structure, ancient Chinese architecture with wood, bricks and tiles as the main building materials, wood frame structure as the main structural mode, by columns, beams, purlins and other main components of the construction, the nodes between the components to the mortise and tenon coincidence, forming a flexible framework. Mortise and tenon joint is a very ingenious invention, this component connection mode, so that the traditional Chinese wood structure has become a special flexible structure beyond the contemporary building frame, frame or rigid frame, which can not only bear a large load, but also allow a certain deformation, under the first load, through the deformation to offset a certain amount of energy, reduce the first response of the structure. Mortise and tenon is a combination of concave and convex connection used on two wooden components.

The protruding part is called tenon (or tenon); The recessed part is called the mortise (or mortise and tenon), and the tenon and the tenon are occluded to play a connecting role. This is the main way in which ancient Chinese architecture, furniture, and other wooden instruments were structured. The mortise and tenon joint structure is a combination of tenon and tenon, which is an ingenious combination between more and less, high and low, long and short between wood pieces, which can effectively limit the twisting of wood pieces in all directions.

The most basic mortise and tenon structure consists of two members, one of which is inserted into the socket of the other, so that the two members are connected and fixed. The part of the tenon that protrudes into the mortise is called the tongue, and the rest is called the shoulder. The mortise and tenon structure is widely used in construction, but also widely used in furniture, reflecting the close relationship between furniture and architecture.

After the mortise and tenon structure is applied to the construction of a house, although each component is relatively thin, it can withstand great pressure as a whole. This structure does not lie in the strength of the individual, but in the combination and support of each other, and this structure has become the basic model of later generations of architecture and Chinese furniture.

A common form of hedging is trading on one market or asset to hedge against risk in another. For example, a company buys a foreign exchange option to hedge against the risk of fluctuations in the spot exchange rate to its operations. The person who hedges is called a hedger or hedger.

Hedge is also translated as "hedging", "disk protection", "support", "top risk", "hedging trading" and so on. Originally, it was intended to refer to the speculative method of betting on two sides in order to prevent losses in gambling.

In the early days, hedging refers to "a trading method that offsets the risk of trading in the spot market by making a contract transaction with the same type and quantity of commodities in the ** market as the spot market, but the trading position is opposite" (Liu Hongru, ed., 1995). In the early days, hedging was used in the agricultural market and the foreign exchange market for real value preservation.

Hedgers are generally actual producers and consumers, or those who own the goods in the future, or those who need to buy the goods in the future, or those who have claims to be collected in the future, or those who have debts to be repaid in the future, and so on. These people are exposed to the risk of losses due to changes in commodities and currencies, hedging is a financial operation to avoid risk, the purpose is to avoid (pass on) the exposed risk in the form of ** or options, so that there is no exposure risk in their asset portfolio.

For example, a French exporter knows that he will receive $1 million for exporting a shipment of cars to the United States in three months, but he does not know what the dollar-to-franc exchange rate will be in three months, and if the dollar falls sharply, he will incur a loss. In order to avoid the risk, you can take the same amount of US dollars (to be paid after three months) in the ** market, that is, lock in the exchange rate, so as to avoid the risk of exchange rate uncertainty. Hedging can be both short and short.

If you already own an asset and are ready to sell it in the future, you can lock it in with a short sale. If you're going to buy an asset in the future and you're worried about the price of that asset going up, you can buy the asset's ** now. Since the essence of the problem here is the difference between **** and the spot ** at maturity in the future, no one will really deliver this asset, and what is to be delivered is the difference between **** and spot ** at maturity.

In this sense, buying and selling the asset is a short purchase and a short sale.

Let's take the example of Jones, the originator of hedging. Jones realized that hedging is a market-neutral strategy, and by undervaluing ** long and other short positions, it can effectively amplify the invested capital and make it possible to buy and sell large sums of limited resources. At that time, the two most widely used investment tools in the market were short selling and leverage.

Hedging, also known as hedging or arbitrage, refers to "risk hedging", hedging refers to buying one thing at the same time, shorting another one to achieve the purpose of risk aversion. Hedging is buying some and shorting others at the same time. Regardless of whether the overall rise or fall is made, as long as the bought one rises more or falls less than the short one, it can be profitable.

Hedging is to make two moves, one profit and one loss to offset. It is generally used for future contracts.

You have to move first**, which means that the specified date + the specified **.

Then it's easy to understand, for example, if you buy a copy, and at the same time you buy another copy with a contract.

When the economy declines, the first copy you buy** will fall, then you sell again, and you will lose money. However, the second copy you buy, there is a contract, and you sell it at the previously specified **, even if the economy declines, you will sell according to the prescribed **. You've earned it

's strength is strong, and if you have money, you will be willful and cheap me.

Hedging is a means of transferring risks, there are various uncertainties in investment activities, and the transactions that retain the factors that can be controlled in their own favor and transfer the uncertainties that they cannot control and cannot bear the risk to other investors are hedging transactions.

For example, if you gamble with a person and roll the dice, roll to 1 point to count the other party as winning, and other points are counted as your win, but you are required to press your own capital every time, and the other party only needs to press the same amount of money as you, the other party's funds are infinitely large (much like the ** market), in this case, although every time you win is very large, but you will lose if you gamble for a long time.

At this time, you can use hedging means to transfer the risk, for example, you find a person with the same strong funds, you sign an agreement with him, if you roll 1 point, he will lose you multiple of your principal, and you will give him 40% of your principal for other points. That's when you find that the gamble becomes a manual effort, and your stake will increase by 60% no matter how many points you roll.

This is a typical hedging, i.e., 1) two bets in different directions at the same time, and 2) two bets with different risk premiums.

Hedging is most common in the forex market, and it is intended to avoid the risk of one-line trading.

The so-called one-line trading is to buy short (or short position) if you are optimistic about a certain currency, and sell short (short position) if you are bearish on a certain currency. If the judgment is correct, the profit will naturally be more; However, if the judgment is wrong, the loss will be greater than that of hedging.

The so-called hedging is to buy a foreign currency at the same time. In addition, it is necessary to sell another currency, i.e. short selling. Theoretically, buying a currency short and selling a currency should be the same as the silver code to be regarded as a real hedging disk, otherwise the two sides will not be able to do the hedging function if the size is different.

The reason for this is that the world's foreign exchange market is calculated in US dollars. All foreign currencies rise and fall in relative exchange rates to the US dollar. The US dollar is strong, that is, the foreign currency is weak; If the foreign currency is strong, the US dollar is weak.

The rise and fall of the US dollar affects the rise and fall of all foreign currencies. Therefore, if you are bullish on a currency but want to reduce your risk, you need to sell a bearish currency at the same time. Strong currency, sell weak currency, if the estimate is correct, the dollar is weak, and the strong currency will rise; Even if the miscalculation is made, the dollar is strong, and the currency of ** will not fall too much.

The weaker currencies that have been shorted have fallen heavily, making losses and making more profits, but on the whole they can still make profits.