Pegging
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stabilizing the price of a security, commodity, or currency by intervening in a market. For example, until 1971 governments pegged the price of gold at certain levels to stabilize their currencies and would therefore buy it when the price dropped and sell when the price rose. Since 1971, a floating exchange rate system has prevailed, in which countries use pegging—the buying or selling of their own currencies—simply to offset fluctuations in the exchange rate.
The U.S. government uses pegging in another way to support the prices of agricultural commodities.
See also parity price.
In floating new stock issues, the managing underwriter is authorized to try to peg the market price and stabilize the market in the issuer’s stock by buying shares in the open market. With this one exception, securities price pegging is illegal and is regulated by the Securities and Exchange Commission.
See also stabilization.
The U.S. government uses pegging in another way to support the prices of agricultural commodities.
See also parity price.
In floating new stock issues, the managing underwriter is authorized to try to peg the market price and stabilize the market in the issuer’s stock by buying shares in the open market. With this one exception, securities price pegging is illegal and is regulated by the Securities and Exchange Commission.
See also stabilization.
| Peg Ratio, Peace Dividend | |
| Penalty Clause, Pennant |
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Pegging
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1. A method of stabilizing a country's currency by fixing its exchange rate to that of another country.
2. A practice of and investor buying large amounts of an underlying commodity or security close to the expiry date of a derivative held by the investor. This is done to encourage a favorable move in market price.
Investopedia Says:
1. Most countries peg their exchange rate to that of the United States.
2. An investor writing a put option would practice pegging so that he or she will not be required, due to lowering prices, to purchase the underlying security or commodity from the option holder. The goal is to have the option expire worthless so that the premium initially received by the writer is protected.
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Barron's Finance & Investment Dictionary
Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
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Mentioned in
Peg
(business term)
Peg (Pegging)
(in banking)
Stabilization
(finance term)
Par Value of Currency
(finance term)
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