Saturday, September 17, 2011

What does it mean to hedge?

To hedge means to minimize exposure to risks you don't like, while maximizing exposure of uncertainties where you have an edge. It is a simple concept, and obviously requires deep understanding of relevant financial products and microeconomics.

Hedge Funds are then vehicles offering sophisticated asset management strategies that require various manners of hedging. This is how investment bank trading desks make money. This is how they consistently out perform the simple buy & hold funds.

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