what is hedging? what is funding? what is deriveatives
market in a lay man language?
- 1 Answers
- 6992 Views
- HDFC, I also Faced
- E-Mail Answers
Answer Posted / samir
Hedge:
Making an investment to reduce the risk of adverse price
movements in an asset. Normally, a hedge consists of taking
an offsetting position in a related security, such as a
futures contract
Funding Agreement:
Funding agreements are marketed to mutual fund companies
and municipal reinvestments. These products are generally
used for their security and flexibility as they can be
altered to meet the specific cash-flow needs of the
contract holder.
Derivative:
In finance, a security whose price is dependent upon or
derived from one or more underlying assets. The derivative
itself is merely a contract between two or more parties.
Its value is determined by fluctuations in the underlying
asset. The most common underlying assets include stocks,
bonds, commodities, currencies, interest rates and market
indexes. Most derivatives are characterized by high
leverage.
Derivatives are generally used to hedge risk, but can also
be used for speculative purposes. For example, a European
investor purchasing shares of an American company off of an
American exchange (using American dollars to do so) would
be exposed to exchange-rate risk while holding that stock.
To hedge this risk, the investor could purchase currency
futures to lock in a specified exchange rate for the future
stock sale and currency conversion back into euros.
| Is This Answer Correct ? | 10 Yes | 1 No |
Post New Answer View All Answers
Do you know the concept of Bulls and Bears?
Explain the source of income for niacl?
What are the major products of the banking industry?
what is digital banking?
What are RTGS and NEFT?
Who is the investment banker?
What is Credit Check?
What are the different benchmarks against which ratios are compared?
Have you faced any failure in life? If yes, how did you overcome it?
What Is Atm Banking (automated Teller Machine)?
Do you know anything about economic survey?
What are the different policies of RRBs?
How would you estimate American Airline's annual revenue?
how to invest in mutual fund? what is bita & how it is calculated?
what is lognormal distribution in the context to insurance?
