Hedge


A hedge (or hedging) refers to the covering of existing positions in an underlying or a portfolio against the risk of price movements. Derivative financial instruments such as options, warrants or futures on the relevant underlying are often used for this purpose.


Historical volatility


Historical volatility is calculated from time series of past market prices.


Homogenised spread


A security’s homogenised spread is the absolute difference between its bid and ask prices – the absolute spread – converted to a ratio of 1:1. A security with a spread of one cent and a ratio of 10:1 has a homogenised spread of 10 cents. Homogenising the spread is important in order to make securities from different issuers comparable.

 

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