Glossary of Financial Terms starting with Alphabet ‘H’

Glossary of ‘Financial Terms’ starting with Alphabet ‘H’, i.e. ‘Meaning’ or ‘Definition’ of Common and Unusual terms relating to Accounting, Auditing, Company Law, GST, Income Tax, Investments, etc., along with the ‘Context’ in which they are used.

Haircut

(1) The margin or more frequently, the capital tied up when a financial intermediary takes a position.

(2) A commission or fee for execution of a transaction (uncommon).

Hammering The Market

Intensive sale of stocks to drive prices down.

Hand Delivery

Delivery and payment on the date stipulated by the Stock Exchange.

Hedge

An asset, liability or financial commitment that protects against adverse changes in the value of or cash flows from another investment or liability. An unhedged investment or liability is called an “exposure”. A perfectly matched hedge will gain in value what the underlying exposure loses or lose what the underlying exposure gains.

Hedge Funds

Private investment pools that invest aggressively in all types of markets, with managers of the fund receiving a percentage of the investment profits. The name is something of a misnomer since a hedge fund’s raison d’etre is quite the opposite of hedging.

Hedge Ratio

The proportion of one asset required to hedge against movements in the price of another.

Herfindahl-Hirschman (HH) Index

The sum of the squares of the market shares of companies in any given industry. It is a measure of industry concentration and is more sensitive to the effects of mergers than simple market shares.

Horizontal spread

The purchase of either a call or put option and the simultaneous sale of the same type of option with typically the same strike price but with a different expiration month. Also referred to as calendar spread.

Hostile Bid

An effort to gain control of a target company that has not been agreed to by the target’s management and board, usually through a tender offer or an unsolicited proposal to the board. Sometimes called an unsolicited bid.

Hot Issue

A security that is expected to trade in the after market at a premium over the public offering price.

Hot Money

Short term international capital movements, motivated by interest rate differential or revaluation hopes/ devaluation fears.

Hybrid

Any security which has the character of more than one type of security, including their derivatives.

Hypothecation

Pledging assets against a loan. The ownership of the asset or the income from the asset is not transferred, except that in default of repayment of loan the asset may be sold to realize its value. Brokers will accept shares as collateral for loans to finance purchase of shares or to cover short sales.

Leave a Reply