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Derivatives




Stack Hedge


A hedging technique and a front load hedge which involves stacking or concentrating most of the futures contracts used to hedge an interest rate swap in specific contract months in order to improve the overall hedge potential. Stack hedging uses a number of futures of a single delivery month to hedge exposures with different delivery months. Therefore, it helps keep the hedge in the more liquid front month futures. The stack hedge is repeated at each resetting or fixing date until the whole position is closed out.



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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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