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Meaning / Definition of

Convertible Hedge

Categories: Strategies,

When you use a convertible hedge, you buy a convertible bond, which you can exchange under certain circumstances for shares of the company's common stock. At the same time, you sell short the common stock of the same company. As in any hedge, your goal is to make more money on one of the transactions than you lose on the other. For example, if the price of the stock falls, you're in a position to make money on the short sale while at the same time knowing that the convertible bond will continue to be at least as valuable as other bonds the company has issued. On the other hand, if the stock gains value, you hope to be able to realize more profit from either selling the convertible or exchanging it for shares you can sell than it costs you to have borrowed and repaid the shares you sold short.There are no guarantees this strategy or any other hedging strategy will work, especially for an individual investor who faces the challenge of identifying an appropriate security to hedge and the appropriate time to act.

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Definition / Meaning of

Stockholm Syndrome

Categories: Business and Management,

The effect in which hostage victims form emotional attachment or fondness towards their captors. The Syndrome is named after the 1973 'Norrmalmstorg Robbery' - an armed raid on Kreditbanken at Norrmalmstorg in Stockholm, Sweden. The bank's employees were held hostage from 23-28 August, during which time some of the victims became emotionally attached to their captors, even defending them after being freed. The term Stockholm Syndrome was first used by criminologist/psychiatrist Nils Bejerot, when assisting police during the siege, referring to the Syndrome in a news broadcast. It was defined in more detail by psychiatrist Frank Ochberg to aid the management of hostage situations. While Stockholm Syndrome chiefly and originally refers to hostage situations the term extends to other forms of 'traumatic bonding', not necessarily dependent on a hostage situation, more broadly describing the somewhat counter-intuitive tendency among certain folk for strong emotional connections to develop within an abusive relationship. At a slightly milder but nevertheless still very worrying level we see the same principle extending to abusive employment situations and other 'working' relationships, where badly-treated and exploited workers can develop strangely positive feelings towards abusive bosses/employers. Whether driven by fear, dependence, gratitude (for limiting the level of abuse), survival impulse, or various other possible factors, the Stockholm Syndrome remains puzzling and paradoxical at any level, and yet a very real human tendency in certain situations.

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