While it may seem that the term “protection” refers to something that is done by your garden-obsessed neighbor, when it comes to investing protection, it is a useful practice that any investor should know about. In the stock market, hedging is a way to get portfolio protection – and protection is often as important as portfolio valuation. Although the methods of derivation of the time-changing hedging ratio cover the second moments of the time-changing financial series , they have mainly focused on hedging with an index futures contract. As we know, stock index futures have a limited shelf life and the most liquid contracts are generally short-term. It is difficult for investors to guarantee a long-term commitment with a futures contract. To solve the problem, a portfolio of nearby futures contracts, with different maturities, is used to cover long-term risk. This is called the rollover hedge strategy. For reasons of rationality, we use the following ratings: the investment capital available for a passive management fund, the number of shares during the investment period, the share price at the time, the price of the stock index futures contract, the unit of the stock index futures contract, the number of index-equity futures to cover long-term risk , the ratio of the maintenance margin that invests in the well diversified portfolio to date, the capital invested in the stock index futures at the time, the savings in the bank on the date, the total of and. Each security strategy has associated costs. So before you decide to use the coverage, you should ask yourself if the potential benefits justify the cost. Remember, the purpose of protection is not to make money; it`s to protect against losses. The cost of hedging, whether it is the cost of an option – or the shortfall if they are on the wrong side of a futures contract – cannot be avoided. Combined (66) with (64), we can offer the rollover backup model with transaction cost Deal Cost Financing can be used for swaps, forwards and certain types of options and other types of derivatives transactions and over-the-counter hedging.
Deal fees primarily include documentation-related legal fees, although in some cases there are also SD, compliance advice, regulatory advice, guarantees and credit support. The consulting and consulting fees for the preparation of hedging contracts are paid by the companies that enter the coverage. These fees include legal fees for the security counterparty`s legal advisors and company representatives.