# Tag Info

## Hot answers tagged hedging

1

This sounds like quadratic hedging. If you have the return of the assets $r_X$ and $r_Y$ with negative correlation $\rho$ between the two (we could think of bonds and stocks) and more variance in one of them then the problem of weighting the two by $w$ is (assume zero expected returns for ease of presentation)  \text{risk} = E[(w r_X + (1-w) r_Y)^2] ...

Only top voted, non community-wiki answers of a minimum length are eligible