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Coinsurance

• Is a hedging or risk management term. It refers to the amount of loss that the investor is positioned to take. When a firm is 85 percent hedged, then it is said that the firm is coinsuring the remainder or 15 percent. When an individual holds 100 shares of stock priced at $80/share and is also long a put with a $75 strike price, the individual is said to be coinsuring for $500 or the difference between the market price and the exercise price.

 
 Embedded terms in definition
 Exercise price
Exercise
Firm
Hedging
Investor
Long
Market
Put
Risk management
Risk
Shares
Stock
Strike price
Take
 
 Related Terms
 Coinsurance effect

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