Wednesday, December 29, 2010


A hedge is an offsetting position in an asset or derivative designed to minimize, reduce, or eliminate a price exposure. For example an investor with a global equities portfolio might hedge the currency risk in their investment using forward contracts or forex options, or a portfolio manager might seek to reduce the beta of their portfolio due to market uncertainty by selling stock index futures. Hedging generally involves the use of derivatives as a risk management tool.

Synonyms: Hedging, Risk management

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