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What is the difference between hedging and pooling?

compare and contrast

Asked by: GILLAND AINEAH KIBIRA 567 days ago - 2 Answers - 1937 views

2 Answers

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Pooling is when you package multiple securities into one big one, and then sell pieces of it. These are called pass through securities, good example is mortgage backed securities. Firm buys a mortgages, puts them into big pool, and sells them to investors, in theory diversifying risk (as we know, not true).

Hedging is covering yourself, most likely with a long and short position. This way, you limit the damage (or benefit) caused by unforseen events. A simple example is to be long a high beta stock, such as Las Vegas Sands (LVS), and be short a low beta stock, like Walmart (WMT). Either way the market goes, you’ll be ok – in theory.

Answer by Rick 567 days ago
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  can i get atleast five differences between hedging and pooling
  
  Answer by GILLAND AINEAH KIBIRA 567 days ago

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