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Hedge ratio (delta) |
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Definition of Hedge ratio (delta)Hedge ratio (delta)The ratio of volatility of the portfolio to be hedged and the return of the volatility of the
Related Terms:Acid-test ratioAlso called the quick ratio, the ratio of current assets minus inventories, accruals, and prepaid Additional hedgeA protection against borrower fallout risk in the mortgage pipeline. Appraisal ratioThe signal-to-noise ratio of an analyst's forecasts. The ratio of alpha to residual standard Articles of incorporationLegal document establishing a corporation and its structure and purpose. Asset/equity ratioThe ratio of total assets to stockholder equity. Asset activity ratiosratios that measure how effectively the firm is managing its assets. Capital rationingPlacing one or more limits on the amount of new investment undertaken by a firm, either Capitalization ratiosAlso called financial leverage ratios, these ratios compare debt to total capitalization Cash flow coverage ratioThe number of times that financial obligations (for interest, principal payments, Cash flow from operationsA firm's net cash inflow resulting directly from its regular operations Cash ratioThe proportion of a firm's assets held as cash. Common stock ratiosratios that are designed to measure the relative claims of stockholders to earnings Concentration accountA single centralized account into which funds collected at regional locations Concentration servicesMovement of cash from different lockbox locations into a single concentration Controlled foreign corporation (CFC)A foreign corporation whose voting stock is more than 50% owned Conversion ratioThe number of shares of common stock that the security holder will receive from CorporationA legal "person" that is separate and distinct from its owners. A corporation is allowed to own Cost-benefit ratioThe net present value of an investment divided by the investment's initial cost. Also called Coverage ratiosratios used to test the adequacy of cash flows generated through earnings for purposes of Covered or hedge option strategiesStrategies that involve a position in an option as well as a position in the Current ratioIndicator of short-term debt paying ability. Determined by dividing current assets by current Customary payout ratiosA range of payout ratios that is typical based on an analysis of comparable firms. Days' sales in inventory ratioThe average number of days' worth of sales that is held in inventory. Debt/equity ratioIndicator of financial leverage. Compares assets provided by creditors to assets provided Debt ratioTotal debt divided by total assets. Debt-service coverage ratioEarnings before interest and income taxes plus one-third rental charges, divided Declaration dateThe date on which a firm's directors meet and announce the date and amount of the next DeltaAlso called the hedge ratio, the ratio of the change in price of a call option to the change in price of the Delta hedgeA dynamic hedging strategy using options with continuous adjustment of the number of options Delta neutralThe value of the portfolio is not affected by changes in the value of the asset on which the Dividend payout ratioPercentage of earnings paid out as dividends. Dollar durationThe product of modified duration and the initial price. Domestic International Sales Corporation (DISC)A U.S. corporation that receives a tax incentive for DurationA common gauge of the price sensitivity of an asset or portfolio to a change in interest rates. Earnings retention ratioPlowback rate. Edge corporationsSpecialized banking institutions, authorized and chartered by the Federal Reserve Board Effective durationThe duration calculated using the approximate duration formula for a bond with an Expense ratioThe percentage of the assets that were spent to run a mutual fund (as of the last annual ExpirationThe time when the option contract ceases to exist (expires). Expiration cycleAn expiration cycle relates to the dates on which options on a particular security expire. A Expiration dateThe last day (in the case of American-style) or the only day (in the case of European-style) Feasible target payout ratiosPayout ratios that are consistent with the availability of excess funds to make Federal Deposit Insurance Corporation (FDIC)A federal institution that insures bank deposits. Financial leverage ratiosRelated: capitalization ratios. Financial ratioThe result of dividing one financial statement item by another. ratios help analysts interpret Fisher's separation theoremThe firm's choice of investments is separate from its owner's attitudes towards Fixed asset turnover ratioThe ratio of sales to fixed assets. Fixed-charge coverage ratioA measure of a firm's ability to meet its fixed-charge obligations: the ratio of Foreign Sales Corporation (FSC)A special type of corporation created by the Tax Reform Act of 1984 that Freddie Mac (Federal Home Loan Mortgage Corporation)A Congressionally chartered corporation that Funding ratioThe ratio of a pension plan's assets to its liabilities. Funds From Operations (FFO)Used by real estate and other investment trusts to define the cash flow from Hard capital rationingCapital rationing that under no circumstances can be violated. HedgeA transaction that reduces the risk of an investment. Hedge fundA fund that may employ a variety of techniques to enhance returns, such as both buying and Hedged portfolioA portfolio consisting of the long position in the stock and the short position in the call Income statement (statement of operations)A statement showing the revenues, expenses, and income (the Interest coverage ratioThe ratio of the earnings before interest and taxes to the annual interest expense. This Irrational call optionThe implied call imbedded in the MBS. Identified as irrational because the call is Leverage ratiosMeasures of the relative contribution of stockholders and creditors, and of the firm's ability Liquidity ratiosratios that measure a firm's ability to meet its short-term financial obligations on time. Long hedgeThe purchase of a futures contract(s) in anticipation of actual purchases in the cash market. Used Long-term debt ratioThe ratio of long-term debt to total capitalization. Long-term debt to equity ratioA capitalization ratio comparing long-term debt to shareholders' equity. Low price-earnings ratio effectThe tendency of portfolios of stocks with a low price-earnings ratio to Liquidity ratiosratios that measure a firm's ability to meet its short-term financial obligations on time. Macaulay durationThe weighted-average term to maturity of the cash flows from the bond, where the Market value ratiosratios that relate the market price of the firm's common stock to selected financial Market-book ratioMarket price of a share divided by book value per share. Modified durationThe ratio of Macaulay duration to (1 + y), where y = the bond yield. Modified duration is Money market hedgeThe use of borrowing and lending transactions in foreign currencies to lock in the Mortgage durationA modification of standard duration to account for the impact on duration of MBSs of Mortgage-Backed Securities Clearing CorporationA wholly owned subsidiary of the Midwest Stock Multinational corporationA firm that operates in more than one country. Negative durationA situation in which the price of the MBS moves in the same direction as interest rates. Open-market operationPurchase or sale of government securities by the monetary authorities to increase or Open-market purchase operationA systematic program of repurchasing shares of stock in market Operationally efficient marketAlso called an internally efficient market, one in which investors can obtain P/E ratio (PE ratio / multiple)Assume XYZ Co. sells for $25.50 per share and has earned $2.55 per share this year; $25. 50 = 10 Payout ratioGenerally, the proportion of earnings paid out to the common stockholders as cash dividends. Pension Benefit Guaranty Corporation (PBGC)A federal agency that insures the vested benefits of Perfect hedgeA financial result in which the profit and loss from the underlying asset and the hedge position Portfolio separation theoremAn investor's choice of a risky investment portfolio is separate from his Possessions corporationA type of corporation permitted under the U.S. tax code whereby a branch operation Price/book ratioCompares a stock's market value to the value of total assets less total liabilities (book Price/earnings ratio (PE ratio)Shows the "multiple" of earnings at which a stock sells. Determined by dividing current Price/sales ratio (PS Ratio)Determined by dividing current stock price by revenue per share (adjusted for stock splits). Private Export Funding Corporation (PEFCO)Company that mobilizes private capital for financing the Profitability ratiosratios that focus on the profitability of the firm. Profit margins measure performance Public Securities Administration (PSA)The trade association for primary dealers in U.S. government Q ratio or Tobin's Q ratioMarket value of a firm's assets divided by replacement value of the firm's assets. Quick ratioIndicator of a company's financial strength (or weakness). Calculated by taking current assets Rate of return ratiosratios that are designed to measure the profitability of the firm in relation to various Rational expectationsThe idea that people rationally anticipate the future and respond to what they see ahead. Receivables turnover ratioTotal operating revenues divided by average receivables. Used to measure how Registration statementA legal document that is filed with the SEC to register securities for public offering. Reserve ratiosSpecified percentages of deposits, established by the Federal Reserve Board, that banks must Reward-to-volatility ratioratio of excess return to portfolio standard deviation. Sell hedgeRelated: short hedge. Related to : financial, finance, business, accounting, payroll, inventory, investment, money, inventory control, stock trading, financial advisor, tax advisor, credit. |