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Hybrid Collar

A collar strategy which is designed to protect a portfolio from the simultaneous occurrence of a number of negative events. This protection is financed by giving up a gain along one source of risk that arises simultaneously with a gain exceeding a preset limit along another source of risk. For example, one counterparty to the collar agrees to assume losses resulting from a portfolio’s underperformance relative to a benchmark when its absolute return is negative in exchange for receiving the portfolio’s relative performance whenever its absolute return exceeds a preset limit.


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