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Categories of Hedgeable risk

    IndianMoney.com Research Team | Wednesday, April 15,2009, 10:47 AM
 

For the subsequent categories of the risk, for exporters, that the value of their accounting currency will fall adjacent to the value of the importers, also known as volatility risk.

  • Interest rate risk – It is the kind of risk that the relative value of an interest-bearing asset, such as a loan or a bond, will deteriorate due to an interest rate increase. Interest rate risks are able to be hedged using fixed income instruments or interest rate swaps.
  • Equity – It is the form of risk, or sometimes reward, for those whose assets are equity holdings, that the value of the equity falls
  • Securities lending – Securities lending is the type of hedged portfolio stock secured loan financing is a form of individual portfolio risk reduction that results typically in a limited recourse loan.

Futures contracts and forward contracts are the ways of hedging against the risk of adverse market movements. These initially developed out of commodity markets in the nineteenth century, but over the last 50 years a huge global market developed in products to hedge financial market risk.

IndianMoney.com Research Team

The research team at IndianMoney.com comprises of certified and experienced professionals who share the company's vision to make every Indian financially literate by equipping every Indian with right and unbiased advice. IndianMoney.com research team provides newsletters, articles, videos and FAQs on various financial products and concepts only to help you make wise financial decisions.

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