Haircut
Difference between the quoted market value of an asset and the value attributed to the asset for the purpose of holding it as collateral.

Hang Seng Index
Principal Hong Kong share price index.

Hard currency
Generally refers to currencies of developed economies but is often restricted to refer to the major global currencies, that is, the US dollar, the euro and the yen. (See also soft currency.)

Hedge fund
Fund that seeks to generate investment returns by using non-traditional investment strategies, utilising mechanisms such as short selling, leverage, program trading, arbitrage, and tools such options, futures, swaps and forwards (derivatives in general).

Hedging
Action taken to protect the value of a portfolio against a change in market prices, often by offsetting the exposure to a specific risk by entering a position in an investment with the exact opposite pay-off pattern. It is usually used to reduce or eliminate risk, although similar techniques can also be used to speculate in a market.

Hedge Funds Standards Board (HFSB)
Industry body responsible for creating and monitoring best practice standards for hedge fund managers. It is an independent body, and compliance with the standards by hedge funds is voluntary.

High yield bond
See junk bond.

High yield stocks
Shares which have a higher than average dividend yield or those where a relatively high proportion of the total return is derived from dividend income. Typical examples of high yield stocks are utilities.

Historic volatility
Volatility as mathematically determined from price fluctuations of the underlying asset over a past specified period of time. (See also implied volatility.)

House view
Formal opinion formed on an issue by an organisation as a whole.

Hurdle rate
Minimum rate of return required before a prerequisite profit is made or a performance fee is paid.

Hyperinflation
Describes extremely high rates of inflation. Usually coincides with general economic collapse.

Hedger
An individual or company owning or planning to own a cash commodity corn, soybeans, wheat, Treasury bonds, notes, bills, etc. and concerned that the cost of the commodity may change before either buying or selling it in the cash market. A hedger achieves protection against changing cash prices by purchasing (selling) futures contracts of the same or similar commodity and later offsetting that position by selling (purchasing) futures contracts of the same quantity and type as the initial transaction.

Hedging
The practice of offsetting the price risk inherent in any cash market position by taking an equal but opposite position in the futures market. Hedgers use the futures markets to protect their businesses from adverse price changes. See Selling (Short) Hedge and Purchasing (Long) Hedge.

High
The highest price of the day for a particular futures contract.

Hog/Corn Ratio
The relationship of feeding costs to the dollar value of hogs. It is measured by dividing the price of hogs ($/hundredweight) by the price of corn ($/bushel). When corn prices are high relative to pork prices, fewer units of corn equal the dollar value of 100 pounds of pork. Conversely, when corn prices are low in relation to pork prices, more units of corn are required to equal the value of 100 pounds of pork. See Feed Ratio.

Holder
See Option Buyer.

Horizontal Spread
The purchase of either a call or put option and the simultaneous sale of the same type of option with typically the same strike price but with a different expiration month. Also referred to as a calendar spread.

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