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In the focus БАНКРАУРБСРТИВКОА
(photo: www.charles-stanley.co.uk)
ized results, 62% of the hedge funds and depends on other factors, and this
realized positive results, while the in- is directly reflected on the profitability
vestors and the mangers believe that of the company, which will inevitably
still such results are far beyond the set reflect on the price of shares. In order
borders and the space for progress is to be able to assure ourselves that our
vast. If one performs a geographic par- share in the company shall not lose
allel, it is observable that the percent- value, we become active in the hedg-
age participation is greatest in North- ing market. We can use the options
ern America, followed by Europe, and by concluding an agreement to sell
the Big Three becomes complete with our shares, thereby to conclude their
Asia and with the Pacific. price. In this way, we protect ourselves
from any downward price variations.
In practice it is proven that the best In addition, there are available futures
hedging techniques arise from the contracts where we will conclude a
performed financial instruments, that short (sales) position for our shares
is, the financial derivatives. Through wherewith we oblige to sell them for
such tools, the companies change their an agreed price. This is only “the most
exposure to the price risk, that is, they vivid” example of how hedging mar-
use protection (hedging). Often the kets function, and primarily, transac-
techniques which are implemented in tion costs should never be forgotten.
the hedging process are quite compli-
cated, and the most commonly used If the hedging market is observed
tools include options and futures. Op- as a daily menu, it seems that it is a
tions are securities which authorize combination of St. Lawrence, the food
for the purchase or the sale of a specif- market in Toronto, the New York Stock
ic property or goods for a price agreed Exchange, in order to be able to trade
in advance on a specific day. Unlike with the world currencies through Citi
them, futures are agreements which bank and Deutsche bank or to buy a
oblige to conduct a specific transaction share in Saudi Aramco – the largest
in a specific time with a defined price. company for petroleum and natural
gas. The variety provided by the hedg-
In order to penetrate deeper in how ing market is indeed great and we can
hedging functions, we would create a only wish to be a part of such a global
case from every day life. Let us assume financial process which offers numer-
that we own shares from the company ous opportunities, it bears great re-
“AAA” which is engaged in the produc- sponsibility and of course, realization
tion of bicycles. Since the bicycle pro- of more secure and more certain fu-
duction industry is cyclical, that is, the ture, if it does exist.
sales varies in different time periods
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