FinancialMarketsChap29

FinancialMarketsChap29 - Finance Ch. 29 Asset Allocation...

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Finance Ch. 29 Asset Allocation Decision – The investment decision concerning how to divide funds across major asset classes Basis – The difference between the cash price and the futures price Basis Risk – In a hedge, the risk the basis will change adversely Cross hedging – Strategy in which a futures contract is used to hedge a position where either the portfolio or the individual financial instrument to be hedged is not identical to the instrument underlying the futures contract Cross – hedging risk – The risk associated with the cross hedging strategy (The price movement of the underlying instrument of the futures contract may not accurately track the price movement of the portfolio or financial instrument to be hedged) Index arbitrage – A strategy that seeks to enhance returns as a result of the mispricing of the futures contract relative to the cash index. Long hedge (buy hedge) – A hedge in which futures are purchased to protect against a rise in the cash price of a financial instrument or portfolio
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FinancialMarketsChap29 - Finance Ch. 29 Asset Allocation...

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