May

16

Hedge, from Anonymous

May 16, 2012 |

 It is interesting how words can become watered down and lose or change meaning. In a current context, Hedge (verb) is one of those. Not so long ago it meant to offset or reduce the exposure of an underlying position. In a new context there is hedging for profit (JP), broker hedging customer orders (white glove firm), hedge funds in general (Paulson down 50%, not really hedged), hedgerow (great led zeppelin lyric).

The Volcker Rule in Dodd-Frank, though I've not read, I am sure is littered with wording around acceptable and non acceptable hedging. Since hedging can not really be defined, this is a vague area that will be applied subjectively and retrospectively. As a rule one would want a hedge to lose money, as the larger underlying position would then be gaining, but somehow I don't think this applies.


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