Talk:Hedge (finance)

From Wikipedia, the free encyclopedia
Business and economics Portal
This article is within the scope of the Business and Economics WikiProject.
B rated as B-Class on the assessment scale
Mid rated as mid-importance on the assessment scale

Contents

[edit] NPOV

  • "For all of the complaining about hedging (not necessarily hedge funds) ruining the global economy, this mostly stems from the lack of understanding by Politicians and others of what function hedging product actually serves," is hardly a neutral statement. Also all the exclamatories are very unencyclopedic. --71.107.5.234 05:04, 24 July 2006 (UTC)
  • The reality is stated in factual terms. There is no inappropriate bias here, simply a fact, which is correct-- politicians fear hedging and hedge funds far more than is warranted. Average citizens lose more money to credit card fraud and auto-insurance fraud, not to mention loss of public goods services from government due to tax evasion by various people and companies, than they have ever lost to hedge fund debacles. Additionally, one of the biggest causes of the Airline industry difficulties is the fact that uninformed politicians made it illegal for Airlines to use hedging to moderate their costs of Fuel. So the Airlines are legally prohibited from using hedging products to manage the single most volatile aspect of their cost structure. Politicians are directly and solely responsible for this idiocy. So there really is no neutrality issue here-- it's all fact.
  • no matter how you support it, "There is no inappropriate bias here, simply a fact, which is correct-- politicians fear hedging and hedge funds far more than is warranted." is an opinion. No one can define how much 'politicians' fear hedging, or how much fear is 'warranted'.
  • This "warranted" comment is commenting on a comment... focus on what's written in the definition-- that Politicians fear hedging (which is true), owing to their lack of full understanding of it (which is also true). Normalsynthesis 04:59, 12 February 2007 (UTC)
Where is the evidence that supports that assertion? Please refer to WP:NOR. --Red King 20:47, 12 February 2007 (UTC)

[edit] Merge articles

It is proposed that the articles Hedging and Hedge (finance) be merged.

[edit] Oppose merger

  • Hedging exists and operates outside of the realm of Finance, as well as within it. I think they should be kept separate, but linked. --user:210.237.140.253 02:47, 4 December 2005

[edit] Support merger

  • Both articles are small. Finance hedging is a special case, maybe even the primary case. It can be a large subsection, even the first subsection. --Red King 13:31, 14 December 2005 (UTC)
  • In finance, they are exactly the same concept: ones a noun the other a verb. Since this article is called Hedge (finance), it's obvious they should be merged. Smallbones
  • same thing, one entry is necessary
  • Exactly, one is the verb, the other is the noun - would be more convenient and logical

[edit] "Hedging one's bets"

Hello. What is the meaning of the term "to hedge a bet" or "to hedge one's bets" in gambling? I think the article should say. I'm guessing it originally had a definite meaning in gambling, even though it has evolved into a generic catchphrase. Thanks for any info. 207.174.201.18 20:08, 17 February 2006 (UTC)

It's like any other kind of hedging - it means sharing the risk or "laying off the bet". So it might mean betting on the most likely contender to be at least placed. But there is another meaning, which is that if you do hedge your bet, you aren't fully committed. It could do with being better written that that, though! --Red King 20:28, 17 February 2006 (UTC)

By the way, I am in favor of merging hedge (finance) with hedging. I think the result should be called hedge (finance). 207.174.201.18 20:08, 17 February 2006 (UTC)

This RtM has been running for ages and everybody agrees. Does anyone know how to make it happen? --Red King 20:28, 17 February 2006 (UTC)
I'd be very grateful if someone could write up a simple hedge bet for inclusion in the article. I wouldn't make much of a job of it myself, and would probably give myself headache. --bodnotbod 18:32, 10 March 2006 (UTC)

[edit] Separate preserves distinction

I am against merging the two, because "hedging" is a broader concept, whereas "hedge(finance)" is entirely and specifically about financial applications. Perhaps a good comparison might be "Walk", and "walk(baseball)". The two are only peripherally related due the physical activity of walking, however they have separate categories in Wikipedia because they are indeed separate concepts. In fact, it would make more sense to make Hedge (finance) a subsection or more closely reated to Insurance, but this linkage has yet to be established. Normalsynthesis 16:50, 24 April 2006 (UTC)

[edit] FRAs lock in Interest rates

The article says: Forward Rate Agreement - A contracted agreement specifying an amount of currency to be delivered, at an exchange rate decided on the date of contract.

However, a FRA locks in a specific interest rate but not a FX-rate.

[edit] Hedging Stock

On the folowing in which 20,000 was changed to 5,000

"Another method to hedge is the beta neutral. Beta is the historical correlation between a stock and an index. If the beta of a Vodafone is 2, then for a 10000 GBP long position in Vodafone you will hedge with a 20000 GBP equivalent short position in the FTSE futures."

It is 20,000, since the beta of 2 implies that the stock is twice as volatile as the index and you are trying to match up price GBP moves of the same (opposite sign) size.

Probably more important is the question of why anybody would want to do this, i.e. we are just looking at the mechanics here, but I think we should look at the motivation. Please do not just say that you are trying to reduce risk - the easiest way to do that is not to trade either Vodaphone or the FTSE futures (or sell the VODAphone if you already own it). There is something much more subtle than risk reduction going on here. Smallbones 12:05, 8 July 2006 (UTC)

If you were hedging against O2 then you might do this - assuming you were interested in O2 rather than the mobile telecoms market.

[edit] Hedging FX exposure

The article says that the HKD is one of the major currencies. This is nonsense. It has been pegged to the USD for over 20 years.

It also mentions the major 8 currencies. If you want to talk about the major currecnies then you should refer to the G10 - USD, EUR, NZD, AUD, GBP, NOK, SEK, CHF, JPY and CAD

[edit] Hedgeable risk categories

I think this needs clarification:

  • For the following categories of the risk, for exporters, that the value of their accounting currency will fall against the value of the importers, also known as volatility risk.


I propose this instead - if you're someone who really knows the subject, and you agree, please make the change:

  • Hedgeable risk is, for the following categories, the risk for exporters, that the value of their accounting currency will fall against the value of the importers, also known as volatility risk.ML-Est 08:43, 3 July 2007 (UTC)