1. In fact, China's private equity fund, namely Sunshine Private Equity Fund, is the embryonic form of hedge fund, but Sunshine Private Equity Fund can only make more money unilaterally, that is to say, it can only make money when the stock rises. With the development of China's stock index futures and margin trading, private equity funds can also be short, which has become a hedge fund.
To put it bluntly, shorting means making money even if the market falls. For example, in the most basic hedging operation. After the fund manager bought a stock, he also bought a put option with a certain price and time limit.
3. The utility of the put option is that when the stock price falls below the price limited by the option, the holder of the seller option can sell his stock at the price limited by the option, thus hedging the risk of stock decline.
Extended data:
Hedge fund trading mode:
In the book Quantitative Investment-Strategy and Technology (edited by Ding Peng, Electronic Industry Press, 20121), the trading modes of hedge funds are classified into four types, namely, stock index futures hedging, commodity futures hedging, statistical hedging and option hedging.
1, stock index futures
Hedging of stock index futures refers to the behavior of taking advantage of the unreasonable price of stock index futures market, participating in the trading of stock index futures and stock spot market at the same time, or trading stock index contracts with different maturities and different (but similar) categories at the same time to earn the difference. Arbitrage of stock index futures can be divided into cash hedging, intertemporal hedging, cross-market hedging and cross-variety hedging.
2. Commodity futures
Similar to the hedging of stock index futures, commodity futures also have hedging strategies. When buying or selling a futures contract, they sell or buy another related contract and close both contracts at a certain time. It is similar to hedging in transaction form, but hedging is to buy (or sell) physical objects in the spot market and sell (or buy) futures contracts in the futures market.
Arbitrage only buys and sells contracts in the futures market, and does not involve spot trading. Commodity futures arbitrage mainly includes cash hedging, intertemporal hedging, cross-market arbitrage and cross-variety arbitrage.
3. Statistical hedging
Different from risk-free hedging, statistical hedging is a kind of risk arbitrage by using the historical statistical law of securities prices, and its risk lies in whether this historical statistical law will continue to exist in the future.
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