WHAT IS HEDGING? {INFOGRAPHIC}
7 Responses to WHAT IS HEDGING? {INFOGRAPHIC}
somehow, JPM’s example wouldn’t be quite so easily explained, or mutually beneficial to both parties.
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It’s only complicated b/c they choose to make it that way.
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Exactly.
The classic was GS’s use of – ‘only the rocket scientists in our back room could possibly understand what was in those instruments.’ – to obfuscate them betting against the very shit they were selling.
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100% agree
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did some hedging yesterday, it was easy after i got the mixture right, i had 40:1, but found it a little to much,so i adjusted to 32:1, its funny how 2stroke engines react, my hedges never looked better.
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The hedgers,of course, utilize speculators for their continuing offer of liquidity. The speculator presumably knows his market (how is the rain going to affect the wheat crop?), or his capital will be bled away. Unfortunately for our society, the speculation dominates the hedging as a function of the credit bubble. Thus JP Morgan.
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The quaint cartoon doesn’t mention what happens when a flood wipes out the farmer’s crop and he can’t deliver the promised wheat.
Ooops.
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