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Template:M summ Commodity Definitions Hedging Disruption: Difference between revisions
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Template:M summ Commodity Definitions Hedging Disruption (view source)
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[[Hedging Disruption - Commodities Provision|You]] might have cause to regret that should you be hedging a commodity derivative transaction with futures when the regulator changes, or imposes, position limits on those futures. We could imagine the sort of language you see in the panel being useful if so. | [[Hedging Disruption - Commodities Provision|You]] might have cause to regret that should you be hedging a commodity derivative transaction with futures when the regulator changes, or imposes, position limits on those futures. We could imagine the sort of language you see in the panel being useful if so. | ||
One subtlety: because position limits apply to a trading book, or even across all trading books in a group, it is possible for the | One subtlety: because position limits apply to a trading book, or even across all trading books in a group, it is possible for the {{commoddefprov|Hedging Disruption}} to be entirely unrelated to the specific hedge for the transaction. This is the reason for the Hedging Party’s discretion to determine which assets are counted towards the limit. | ||
===Indexes are complicated=== | ===Indexes are complicated=== | ||
Note that this wouldn’t necessarily capture activity where the breach of position limits is caused by a change in option delta inside an existing index to which the business has exposure, as might happen where an index rebalances: | Note that this wouldn’t necessarily capture activity where the breach of position limits is caused by a change in option delta inside an existing index to which the business has exposure, as might happen where an index rebalances: | ||