FOREX - Trends, Forecasts and Implications 2015(continued) - page 1908

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denniss:
I gave the man a simple example of hedging, for first grade. If I start telling him about complex, diversified, time-component portfolios, I'm afraid he will go into shock at the first sentence, so I didn't develop a topic he doesn't understand just for his health.
In general, if we are strict about it, it is called statistical arbitrage, not hedging. But first we need to understand what it is done for, and therefore we need at least superficially familiarize ourselves with the Markowitz's portfolio theory, in particular, how risks are understood there. Generally speaking, the most important question in portfolio construction is "why" and what it will yield in the end.
 
denniss:
What are you digesting? The formulas used to calculate hedge portfolios are quite complex, and here he just wrote general concepts.

Okay. Again a childish question:

Do I, the average home internet trader, need to know how to calculate hedge portfolios or is it enough to know the general concepts?

 
Vadens:

Okay. Again a childish question:

Do I, the average home internet trader, need to know how to calculate hedge portfolios or is knowing general concepts enough?

I realised that I don't, which is what I said right away.
 
vng_nemo:
........Actually, the most important question in creating a portfolio is 'why', what will it bring in the end.
Words of gold!
 

So, clever people, just write down where you will buy or sell Euros this week and, accordingly, where you will leave the market...

just in and out, no hoovering...

 
denniss:
The formulas used to calculate hedge portfolios are quite complex, and here he has just written general concepts.

Example.

A farmer comes to the bank and asks for a $200,000 loan secured by property for his current operations, with an expectation of a future harvest.

A second comes in, asks for the same amount against the same grants, but with a business plan consisting of a portfolio with a forward contract against the future harvest at a price that guarantees to cover the bank's interest and generate some profit.

A third comes in with the same terms as the second, but with a business plan and a portfolio with a crop forward and a $100,000 futures contract.

The question is where the hedge is and who gets the credit first.

 
Lesorub:

So, clever people, just write down where you will buy or sell Euros this week and, accordingly, where you will leave the market...

just in and out, no hoovering...

I have been asking for this for three days, just to show, they do not want to.
 
vng_nemo:

Example.

A farmer comes to the bank and asks for a $200,000 loan secured by property for his current operations, with an expectation of future harvests.

A second comes in, asks for the same amount against the same grants, but with a business plan consisting of a portfolio with a forward contract against the future harvest at a price that guarantees to cover the bank's interest and generate some profit.

A third comes in with the same terms as the second, but with a business plan and a portfolio with a crop forward and a $100,000 futures contract.

The question is where the hedge is and who gets the loan first.

This is pointless talk, there is nothing in it for trading.
 
Vadens:

Okay. Again a childish question:

Do I, the average home internet trader, need to know how to calculate hedge portfolios or is knowing general concepts enough?

The answer is simply no. But you have to understand how to calculate the range from which the price will not exit with a certain probability in a certain amount of time. It will allow you to estimate your losses in case of failure, calculate the lot you will enter, and know exactly where you will exit and enter. And this is the mechanics. This is a trading system. And, because you know how to determine the range, you can assess the profitability of the system and accept it or discard it. Or try to reduce risks by adding other instruments.
 
denniss:
I have been asking for this for three days, just to show, they don't want to.
It's a pointless request, there's nothing in it for the trade. Are you sure it's okay if you don't even know my gender, let alone anything else?
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