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Webster's New World Finance and Investment Dictionary » dynamic hedging
dynamic hedging
dynamic hedging definition - finance
A
portfolio insurance technique that creates an option-like return by increasing
or reducing the position in the underlying security or futures, options, or
forward contract. The intent is to simulate the delta change in the value of an
option position. One example of dynamic hedging is increasing or decreasing a
short stock index futures position (selling stock index futures that you donÂ’t
own) to create a synthetic put on a portfolio, This will create a return that
is similar to portfolio insurance.
Webster's New World Finance and Investment Dictionary Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.
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