Hedge

A position taken in order to offset the risk associated with some other position.  Most often, the initial position is a cash position and the hedge position involves a risk-management instrument such as a swap or a futures contract.

Hedge Fund

Pooled investor funds that are aggressively managed by professionals with the goal of generating high returns.  Hedge funds use leverage and derivative instruments to aid in generating high returns and attract a more sophisticated type of investor, ie, requiring minimum amounts of income and money to invest, to be eligible.

Hedge ratio

The number of units of a hedging instrument that must be held to minimize the overall portfolio variance (cash position and hedge combined). Applies to single instruments as well.

High Yield Bond

Also called junk bonds, these bonds have a credit rating of BB or lower. A high yield bond is considered a speculative grade bond or below investment grade bond and is issued by companies with a higher credit risk. As the name suggests, a high yield bond earns high gross income, to compensate for the high credit risk.

Horizon Matching

A variant of immunization strategy, in which the cash flows due up to a certain intermediate horizon are matched on a cash flow basis, and the cash flows due after this intermediate horizon are matched on a duration basis.

Hybrid Capital

A hybrid security that the issuer classifies or structures as capital. Generally between debt and equity in regard to subordination.

Hybrid Security

A security that has features of both equity and fixed income securities.