|
A
derivative is an asset that derives its value from another
asset. In every day language: derivatives are contracts to buy
or sell their underlying assets at specified prices, and
specified time frame in the future. Examples are: Futures,
Equity Options, Options on Futures, Swaps, Equity Volatility
etc.
¡@
Derivatives and Derivatives Markets were developed specifically
for institutions and professional money managers to hedge or
control market risks. They also offer opportunities to
speculators to take risks for profit potential. Therefore, they
can be either highly risky or low risk totally depending upon
how they are used.
¡@
Professional money managers use derivatives and derivatives
markets to hedge their positions, substantially reduce their
market risk, and increase investment return. When derivatives
are involved, the market becomes multi dimensional (no longer
just price movement). Best money managers know how to profit
from other aspects of the market, such as volatility and time
etc. Therefore, they can be wrong on price direction, but still
make a profit. For details, please
contact us.
¡@
|
¡@ |
What is hedging?
Simply put:
hedging is risk control. ¡§Hedging¡¨ reduces, but never increases
market risks. If a trade or a position in the market does not
reduce risk, it¡¦s not hedging, it¡¦s speculation. Money managers
who truly hedge their positions should be able to present to
clients the risk reduction in each position they take in a
quantitative manner.
Read More
Why hedge?
It is our
belief that no one can predict the market! ¡§Experts¡¦ opinion
about the market means absolutely nothing! Exposure to the
market is highly risky, and therefore must be hedged by various
hedging strategies.
Read More |
