The Best Strategies for the Worst Crises

Cook, Michael; Hoyle, Edward; Sargaison, Matthew; Taylor, Dan; Hemert, Otto Van

doi:10.2139/ssrn.2986753

Cited by 5 publications

(2 citation statements)

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“…However, in practice, shorting large numbers of corporate bonds is nearly impossible in a crisis. 2007-2009 was a credit crisis, short credit risk had a return rate of 127%, but in the sample, credit only produced a small positive return [2]. By contrast, holding a put option is more reliable than shorting credit risk, possibly because it is more closely correlated with the value of the equity being hedged.…”

Section: Passive Hedge Methodsmentioning

confidence: 90%

“…Long strategies typically profit when a company's market value rises; Hedging methods exist to make money when firm values fall. In their paper, Cook et al point out that a rolling long put option strategy may be the most direct way of crisis hedging because it is very effective in preventing the risk of A sudden drop in the stock market [2]. As price increases, buy a put option with a higher strike price and sell a put option with a lower strike price.…”

Section: Passive Hedge Methodsmentioning

confidence: 99%

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The Traditional Hedging Method in Times of Crisis and the New Tool: Cryptocurrency

He¹

2022

Proceedings of the 2022 7th International Conference on Financial Innovation and Economic Development (ICFIED 2022)

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This paper gives a clear definition of the crisis and summarizes the hedging methods used to apply risk in times of crisis. The results show that active hedging strategies are more effective than passive hedging strategies when the economy is at its worst. Then, it proposes a new type of hedging method that may be used in the futurecryptocurrency, illustrating its model, operation principle, hedging effect, and feasibility. The results show that cryptocurrencies such as Bitcoin have a significant impact on hedging against the dollar in the short term and can be used to supplement traditional hedging methods such as gold and momentum.

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Section: Passive Hedge Methodsmentioning

confidence: 90%

Section: Passive Hedge Methodsmentioning

confidence: 99%