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Derivatives




Convexity Hedge


An hedged position in which the investor purchases more than one call option for each unit of the underlying he has sold short. This position becomes in the money as the market price moves away from the strike price of the options either in upward or downward direction.

It is also known as a reverse option hedge or a long straddle.



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Derivatives have increasingly become very important tools in finance over the last three decades. Many different types of derivatives are now traded actively on ...
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