Caricature of a tramp. A vagrant or a vagabond is a person, often in poverty, who wanders from place to place without a home or regular employment or income. Other synonyms include tramp, hobo, and drifter.
Hedge Ratio. 1. A ratio of the value of the proportion of a position that is hedged to the value of the entire position. A hedge ratio shows how exposed an investment is to risk. For example, if a hedge ratio is .65, then 65% of the investment is protected from risk, while 35% remains exposed. 2. A ratio of the value of a futures contract to the value of the underlying asset. This is used to identify and minimize risk in the contract.
Optimal Hedge Ratio In hedging, you can hedge your whole portfolio or some portion of it. The hedge ratio isthe size of the futures contract relative to the cash transaction. In a previous example involving atrader with oil en route from the Gulf, the hedge ratio was one, since she sold a futures contractrepresenting each barrel of oil. When using turnips to hedge, the ratio was still 1, since the valueof the crude was hedged with an equal value of turnips.