Hedging

Hedging
A strategy designed to reduce investment risk using call options, put options, short selling, or futures contracts. A hedge can help lock in existing profits. Its purpose is to reduce the volatility of a portfolio, by reducing the risk of loss. The New York Times Financial Glossary

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hedge hedge 2 verb [intransitive, transitive]
1. FINANCE if you hedge a financial risk, you protect yourself against it, for example with futures (= agreements to buy or sell currencies etc on a fixed date in the future at a fixed price) or option S (= rights to buy or sell currencies etc at a particular price within a particular period of time or on a particular date in the future):

• I've never hedged currencies before. But I could see the dollar was getting lower, and I hedged for the first time, betting that the dollar would rise.

• Northwest Airlines saved more than $7 million in fuel costs because it hedged 4.2 million gallons of its fuel purchases for each month by buying futures contracts.

— hedging noun [uncountable] :

• Manufacturers have been doing more hedging because they expect prices for copper to rise.

• sophisticated currency hedging techniques

2. hedge your bets to reduce your chances of failure or loss by having several choices available to you:

• Promoters, uncertain whether losing weight was going to stay popular, hedged their bets by advertising that their products could help you add weight or reduce it.

hedge against something phrasal verb [transitive] FINANCE
if you hedge against, or hedge yourself against, a financial risk, you protect yourself against it by hedging:

• Consumers of a raw material can hedge against price movements through the futures markets.

• Many companies have not hedged themselves against a rising yen.

• Although invested in Europe, they weren't sufficiently hedged against currency changes.

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   An action or strategy designed to minimize risk. A hedge often takes the form of a transaction in one market or asset, which protects against losses in another, e.g. a company buys an FX (foreign exchange) option to protect against the risk to its business of fluctuations in spot currency rates. Those pursuing hedging strategies are known as hedgers.
   ► See also Speculator.

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hedging UK US /ˈhedʒɪŋ/ noun [U] FINANCE, STOCK MARKET
► the activity of reducing the risk of losing money on shares, bonds, etc. that you own, for example, by buying futures (= agreements to sell shares for a particular price at a date in the future) or options (= the rights to buy or sell shares for a particular price within a particular time period): »

Originally hedge funds took a more traditional approach to hedging: they bought shares they thought would rise in companies they expected to do well.

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Hedging instruments such as futures contracts are priced in dollars.

 »

a hedging policy/strategy/programme


Financial and business terms. 2012.

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Look at other dictionaries:

  • hedging — hedg·ing n: the practice of engaging in offsetting financial transactions to reduce losses Merriam Webster’s Dictionary of Law. Merriam Webster. 1996. hedging …   Law dictionary

  • hedging — HÉDGING s. f. (fin.) operaţie prin care un importator sau o bancă se angajează, pe de o parte, să plătească o sumă în valută la un anumit termen, iar pe de alta, se împrumută cu aceeaşi sumă în valută, având acelaşi termen de rambursare. (<… …   Dicționar Român

  • hedging — (izg. hȅdžing) m DEFINICIJA ekon. poslovno financijska strategija izbjegavanja rizika, odnosno mogućeg gubitka (nakon neke operacije poduzima se druga financijska ili poslovna operacija) ETIMOLOGIJA engl …   Hrvatski jezični portal

  • hedging — ► NOUN 1) the planting or trimming of hedges. 2) bushes and shrubs planted to form hedges …   English terms dictionary

  • Hedging — Der Begriff Kurssicherung oder Hedgegeschäft (kurz Hedging; von engl. to hedge [hɛdʒ], „absichern“) bezeichnet ein Finanzgeschäft zur Absicherung einer Transaktion gegen Risiken wie beispielsweise Wechselkursschwankungen oder Veränderungen in den …   Deutsch Wikipedia

  • hedging — The practice of offsetting the price risk inherent in any cash market position by taking an equal but opposite position in the futures market. Hedgers use the futures markets to protect their business from adverse price changes. Selling ( Short)… …   Financial and business terms

  • hedging — Method of reducing the risk of loss caused by price fluctuation. It consists of the purchase or sale of equal quantities of the same or very similar commodities in two different markets at approximately the same time, with the expectation that a… …   Universalium

  • hedging — A means by which traders and exporters of grain or other products, and manufacturers who make contracts in advance for the sale of their goods, secure themselves against the fluctuations of the market by counter contracts for the purchase or sale …   Black's law dictionary

  • hedging — A means by which traders and exporters of grain or other products, and manufacturers who make contracts in advance for the sale of their goods, secure themselves against the fluctuations of the market by counter contracts for the purchase or sale …   Black's law dictionary

  • Hedging — Hedge Hedge, v. t. [imp. & p. p. {Hedged}; p. pr. & vb. n. {Hedging}.] 1. To inclose or separate with a hedge; to fence with a thickly set line or thicket of shrubs or small trees; as, to hedge a field or garden. [1913 Webster] 2. To obstruct, as …   The Collaborative International Dictionary of English

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