Glossary

Harmonized Tariff Schedule (HTS)

A method of classification used by many countries to determine tariffs on imports.

Heavily Indebted Poor Countries Initiative

The HIPC Initiative is a major international response to the burdensome external debt held by the world's poorest, most indebted countries. It originated in 1996 as a joint undertaking of the World Bank and the International Monetary Fund (IMF). Also known as the HIPC Initiative.

Hedge

A position or operation that offsets an underlying exposure. For example, a forward currency hedge uses a forward currency contract to offset the exposure of an underlying position in a foreign currency. Hedges reduce the total variability of the combined position.

Hedge Funds

Private investment partnerships with a general manager and a small number of limited partners.

Hedge Portfolio

The country-specific hedge portfolio in the International Asset Pricing Model serves as a store of value (like the risk-free asset in the CAPM) as well as a hedge against the currency risk of the market portfolio.

Hedge Quality

Measured by the r-square in a regression of spot rate changes on futures price changes.

Hedge Ratio

The ratio of derivatives contracts to the underlying risk exposure.

Hedging

Reducing the risk of a cash position by using the futures instruments to offset the price movement of the cash asset.

High-withholding-tax Interest Income

In the U.S. tax code, interest income that has been subject to a foreign gross withholding tax of five percent or more.

Historical Volatility

Volatility estimated from a historical time series.

Holding-period Return

The rate of return over a given period.

Home Asset Bias

The tendency of investors to overinvest in assets based in their own country.

Homogeneous Expectations

Idea that all individuals have the same beliefs concerning future investments, profits, and dividends.

Hyperinflation

An extremely high rate of inflation, often exceeding several hundred or several thousand percent, that causes a country's money to become practically worthless.

Hysteresis

The behavior of firms that fail to enter markets that appear attractive and, once invested, persist in operating at a loss. This behavior is characteristic of situations with high entry and exit costs along with high uncertainty.