Definition of "Hedging"
Method of transferring risk to permit the risk bearer to assume two offsetting positions at the same time so that, regardless of the outcome of an event, the risk bearer is left in a no win/no lose position. For example, in the options market, a stock owner of an underlying stock can write calls or buy puts. In the same options market, the short sellers of the underlying stock can buy calls or write puts.
Popular Insurance Terms
Provision used to avoid duplication of coverage in other policies; to eliminate coverage for property under the care, custody, and control of an insured business; as well as to avoid ...
Investment risk associated with the possibility that there is a rise in the interest rates after a fixed income security has been purchased resulting in a decline in that security's price. ...
same as term Lost Policy Receipt: life insurance company form to be signed by a policyholder who wishes to surrender a policy that has been lost. The signed receipt then becomes evidence ...
Charging the insured an amount that is above the actual premium required for placing and maintaining the policy in force. ...
Same as term Excess of Loss Reinsurance: method whereby an insurer pays the amount of each claim for each risk up to a limit determined in advance and the reinsurer pays the amount of the ...
Type of accounting method, in life insurance, designed to match revenues and expenses of an insurer according to principles designed by the Financial Accounting Standards Board and the ...
Agreement by the insured that, simply because the insurer investigates and determines a value for the claim, the insurer does not admit liability for the claim. ...
Branch of knowledge dealing with the mathematics of insurance, including probabilities. It is used in ensuring that risks are carefully evaluated, that adequate premiums are charged for ...
Interest earned on dividends from a participating life insurance policy left on deposit with the insurance company and subject to taxation. ...
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