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Bona Fide Hedge

A hedging transaction that meets a host of conditions for qualification as bona fide hedge. The transaction must (1) represent...

Instant History Bias

A variation of the survivorship bias that results from inclusion of a new hedge fund into a given index and...

Tailing Adjustment

An adjustment that is made to the number of futures contracts used in hedging a position in order to accommodate...

Delta Spread

A ratio spread which is constructed by involving deltas of options such that a neutral “overall” position is created. To...

Indirect Hedge

A transaction that, as opposed to a direct hedge, involves hedging one commodity with a contract for a different commodity....

Proxy Hedge

A transaction that, as opposed to a direct hedge, involves hedging one commodity with a contract for a different commodity....

Dirty Hedge

A transaction that, as opposed to a direct hedge, involves hedging one commodity with a contract for a different commodity....

Dirty Hedge Instrument

A derivative instrument which cannot be perfectly hedged using available exchange-traded instruments. In other words, the risks associated with such...

Hurdle Rate

A threshold level for a hedge fund's performance which maintains that the fund management receives the fees only if the...

High Watermark

An industry standard that is used to determine payment of performance fees (to a hedge fund's management). It helps limit...