Traditional Culture Encyclopedia - Traditional stories - What is tracking hedging? (tailingthehedge)

What is tracking hedging? (tailingthehedge)

When futures are used for hedging, a small adjustment can be made to the daily delivery, which is called tracking hedging.

Hedging is to conduct two market-related transactions at the same time, with opposite directions, the same amount and breakeven. Market correlation refers to the identity of market supply and demand that affects the prices of two commodities. If the relationship between supply and demand changes, it will affect the prices of two commodities at the same time, and the prices will change in the same direction.

Information on capital expansion:

Arbitrage strategy is the most traditional hedging strategy, including convertible bond arbitrage, stock index futures spot arbitrage, intertemporal arbitrage, ETF arbitrage and so on.

Its essence is the application of the "one-price principle" in the pricing of financial products, that is, when there are pricing differences between different manifestations of the same product, buy relatively undervalued varieties and sell relatively overvalued varieties to obtain the intermediate price difference income. So the risk of arbitrage strategy is the smallest, and some strategies are called "risk-free arbitrage".

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