A reduction applied to the value of collateral to allow for its price falling before it can be sold. Riskier or less liquid assets take larger haircuts. Where it appears →
Hazard rate
The instantaneous rate of default conditional on survival so far. It links a constant default intensity to the survival probability. Where it appears →
Hedge fund
A pooled fund, lightly regulated, that may use leverage, short selling and derivatives. Strategies vary widely. Where it appears →
Hedging
Taking a position that offsets an existing exposure, so that a loss on one is matched by a gain on the other. A hedge usually leaves some basis risk. Where it appears →
Heteroskedasticity
Error variance that changes across observations rather than staying constant. Coefficient estimates remain unbiased but the usual standard errors are unreliable. Where it appears →
High-quality liquid assets
Assets that can be converted to cash quickly with little loss of value, even in stress. Cash and central bank reserves are the best examples. Where it appears →
Historical simulation
A way of estimating VaR by revaluing today's portfolio under past changes in market factors and reading the loss quantile. It assumes no distribution but treats the past window as the future. Where it appears →
Hypothesis test
A procedure that decides whether sample evidence is strong enough to reject a stated null hypothesis. The decision rests on a test statistic and a significance level. Where it appears →
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