Comments on: Roundtable Discussion: Stephen Ryan

By: Lisa Koonce

Lisa Koonce — Fri, 29 Jan 2010 18:42:32 +0000

Thanks. So is a non-economic hedge one that doesn’t do it well enough or not close to 1 to 1? or ??

By: Stephen Ryan

Stephen Ryan — Fri, 29 Jan 2010 02:14:11 +0000

In principle, an economic hedge is a position whose value (or possibly cash flow) fluctuations offset those of the hedged item(s). At the firm level, an economic hedge’s value (or possibly cash flow) fluctuations offset those of all of the other positions held by the firm. It is a lot easier to define an economic hedge than to identify one in practice, particularly at the firm level.

By: Lisa Koonce

Lisa Koonce — Wed, 27 Jan 2010 16:05:53 +0000

Stephen’s discussion was excellent, as one would expect.

I did want to ask a follow-up question, though. How do you define economic hedge versus non-economic hedge?