Entering into the purchase of commodity futures contracts to reduce the risk of an unfavorable price fluctuation.
1. The temporary purchase or sale of a contract calling for future delivery of a specific security at an agreed upon price to offset a present or anticipated position in the cash market. 2. The technique of making offsetting commitments to minimize the impact of contrary adverse movements.
A transaction strategy used by dealers and traders in foreign exchange, commodities and securities, as well as farmers, manufactures, and other producers, to protect against severe fluctuations in exchange rates and market prices. A current sale or purchase is offset by contracting to purchase or sell at a specified future date.
A hedging transaction is a purchase or sale of a financial product, having as its purpose the elimination of loss arising from price fluctuations. With regards to currency transactions it would protect one against fluctuations in the foreign exchange rate. (see Forward Contract)
The use of the futures/options markets to reduce or offset risk from market fluctuations in the physical/underlying market. See also "Anticipatory Hedging", and "Portfolio Hedging". In any case, the purpose of hedging is the same: any loss you make in one market is offset by a profit made in the other market.
Term used in foreign currency management
Using transactions to lower risk.
is strategy focused upon reducing exposure to risk of loss resulting from fluctuations in exchange rates, commodity prices, interest rates etc. Hedging in securities is taking two positions that will offset each other if prices change, thereby limiting financial risk.
Taking an opposite position in the commodity futures market to your position in the physical market.
Hedging - a combination of short and long positions on different tools at which the currency risk decreases.
Buying or selling earlier and more than really needed in order to protect the company against price increases or shortages of commodities or components to realize profits when prices fluctuate.
minimising risk in future transactions by agreeing compensating transactions in the present.
Taking a buy or sell position in a futures market opposite to a position held in the cash market to minimize the risk of financial loss from an adverse price change.
Reducing the risk of a cash position by using the futures instruments to offset the price movement of the cash asset.
reducing investment risk by using futures contracts, call and put options and or short selling
The practice of speculating on the price for a future commodity a to avoid exposure to the risk of unacceptably large variations in real time price movements. There is usually a price to be paid for purchasing a future commodity at a hedged price; the price charged for the commodity commonly includes an extra charge to protect the seller against the risk of losing money through selling a commodity that he may have to purchase in the future at a price that is possibly higher than the price at which he contracts to provide it for.
The initiaion of equal and opposite positions in the cash and futures market, to minimize the risk of financial loss due to adverse price changes.
A technique of protecting one’s business, assets or business transactions from adverse changes in market prices or rates. The basic principle of hedging is to take an equal but opposite position on the market. Derivatives, such as futures and options, are also commonly employed to reduce the risk of a transaction. Hedging is widely used in merchandise, commodities, foreign exchange and securities transactions for security rather than speculative purposes. Français: Protéger/Couverture Español: Cobertura
A strategy of protecting an open position, this can be done by ‘short selling' or trading other derivatives.
A method used by traders, sophisticated investors and financial institutions to reduce loss due to market fluctuations. Various instruments, such as forwards, futures and options, are used to offset the potential value fluctuations in portfolios, thereby reducing risk often at the expense of return. Hedging costs should be taken into account when looking at the total return on a portfolio. An example of hedging: Holders of a given stock buy a put option or sell a call option on the same stock. If the stock goes down, the option will rise in value, providing a "hedge"" against losses.
Action taken to hedge existing or future positions against risks (e.g. price or interest rate risks) by designating one or more hedging instruments so that their change in fair value is an offset, in whole or in part, to the change in fair value or cash flows of a hedged item.
The initiation of a buying or selling position in a futures or options market, intended as a temporary substitute for the later actual sale or purchase of a commodity. Hedging aims to protect against adverse price movements prior to the actual transaction.
Technique for transferring the risk of unfavorable price fluctuations to a speculator by purchasing and selling options and futures contracts on an organized exchange.
The use of a security (e.g., an option) to reduce the market risk of a current holding. The hedging security (the option) is expected to perform well under market conditions in which the other security would perform poorly.
A variety of financial instruments used to guarantee the price to be received or paid on certain commodities such as gold, silver, interest rates, crude oil or currencies.
A marketing strategy that reduces or transfers risk of loss from changes in market interest rate.
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. Examples include a position in a futures market to offset the position held in a cash market, holding a security and selling that security short and a call option against a shorted stock. A perfect hedge eliminates the possibility for a future gain or loss. An imperfect hedge insures against a portion of the loss.
A strategy used to offset investment risk. A perfect hedge is one eliminating the possibility of future gain or loss. It involves purchasing a derivative security (i.e. option or future) in order to reduce or neutralize all or some portion of the risk of holding another security.
Hedging is a risk reduction strategy whereby investors and traders take offsetting positions in an instrument to reduce their risk profile. The practice usually involves taking both a long and a short position in an instrument and so, usually, necessitates using financial derivatives with which it's possible to short sell. Hedging strategies are also employed by professional fund managers to control the risk exposure of large managed funds. In this context, hedging is a more complex process as it involves a whole portfolio of different investments - each with its own unique risk/return profile.
reducing the risk of unfavorable movement in commodity or security prices, or exchange or interest rates, by way of futures contracts.
Hedging is an investment technique designed to offset, or neutralize, a potential loss on one investment by purchasing a second investment that you expect to perform in the opposite way. For example, you might sell short one stock, expecting its price to drop. At the same time, you would buy a call option on the same stock as insurance against a large increase in value.
Method of reducing different types of financial risks.
undertaking an action to offset some possible losses related to a separate transaction
The practice of offsetting the price risk inherent in any cash market position by taking an equal but opposite position in the futures market. A long hedge involves buying futures contracts to protect against possible increasing prices of commodities. A short hedge involves selling futures contracts to protect against possible declining prices of commodities.
Selling forward currency exchange, borrowing, or using other means to protect against losses from possible currency exchange rate changes which affect values of assets and liabilities.
The process of protecting oneself against risk. For example, a company who owes money to an overseas company may want to hedge against the risk that the exchange rate moves against them. They could do this by taking out a future contract for foreign exchange, i.e., they agree to buy now at a fixed price in the future.
any technique designed to reduce or eliminate financial risk; for example, taking two positions that will offset each other if prices change
The idea behind hedging is to reduce and minimize investment risk. This method incorporates such tools as call options, put options, futures contracts, and/or short selling. For example, investors might hedge against losses by buying a put option for a stock that they own so that in case the stock's value should go down, the option's value will go up. Unfortunately, hedging is not possible in the Marketocracy competition because the tools used to accomplish this method of investing are not allowed.
This is a form of insurance - you "hedge" your investment against risk. When hedging you buy two investments that will have an opposite response to market forces. So, if one rises the other will fall, leaving you in the same position.
The purchase or sale of mortgage future contracts by a mortgage banker or lender for the purpose of protecting cash transactions made at a future date.
A strategy for reducing risk by purchasing an investment (or currency) in opposition to another investment (currency) so as to counter any loss made by either. Hedging is used to reduce the risk of loss through adverse movement in interest rates, equity markets, share prices or currency rates.
A term covering a variety of strategies which have the effect of altering the currency exposure of a portfolio compared to the underlying assets held. See cross hedging and proxy hedging.
The process of reducing or eliminating the risk in a portfolio by offsetting potential gains and losses. Hedging is commonly achieved through a combination of the use of derivative instruments and short selling. For example, a hedged equity portfolio would have a long position in stocks, but would have a short position in equity call options or in an index future.
using derivative products to reduce exposure to interest rate and currency fluctuations.
A form of insurance aimed at reducing risk of loss due to eg unfavourable exchange rate movements.
Eliminating some or all of one's exposure to a foreign currency by trading that currency for U.S. dollars.
Various techniques used to offset investment risk.
Strategy used to protect the investor against the financial risk of unfavourable price developments (e.g. owing to fluctuations in share prices, interest rates or currencies). The hedge is mostly achieved by way of options and futures. In the case of LGT Strategy Funds, the currency risks in particular are hedged to a large extent.
A strategy to reduce the risk of an open position.
An investing strategy designed to balance, or "hedge", investment risks.
A tactic for offsetting an investment risk in an effort to minimize the possibility of future risk.
A risk management technique intended to mitigate the Bank's exposure to fluctuations in interest rates, foreign currency exchange rates, or other market factors. The elimination or reduction of such exposure is accomplished by engaging in capital markets activities to establish offsetting positions.
Covering financial risks, usually with the use of derivatives. For example, the risk of holding a share may be offset by owning a 'put' option on that share. Other hedging can be accomplished by balance sheet measures: for example, the foreign exchange risk involved in receiving foreign income may be offset by borrowing in that currency.
The purchase or sale of mortgage future contracts by a mortgage bankers or lenders for the purpose of protecting cash transactions made at a later date.
A strategy by which transactions are entered into for the purpose of protecting against the risk of unfavorable price developments (interest rates, share prices).
The establishment of an opposite position on a futures market or by means of options from that held and priced in the physical commodity. Without hedging, the physical position would be at risk to price fluctuations
To offset a position with the intent of managing risk. The process of protecting the value of an investment from the risk of loss in case the price fluctuates. Hedging is accomplished by protecting one transaction with another. A long position in an underlying instrument can be hedged or protected with an offsetting short position in a related underlying instrument.
Is the process of protecting a position. It is the placement of a position to offset an exposed cash or physical market position. Also, see Risk Management.
To engage in a transaction that partially or fully reduces a prior risk exposure.
The process of mitigating a financial risk produced by the conduct of a business.
The action of reducing the risk of an outright position in one Market by taking an opposite position in a similar or derivative market, e.g. if you had an up bet in the FTSE you might enter a down bet in the DAX. In this case although the Hedge would not be exact, it is unlikely that the FTSE will move heavily in the opposite direction to the DAX (but, of course, not impossible).
Cover provided to afford protection against any losses that may result from price fluctuations.
A device used by traders and sophisticated investors to reduce loss due to market fluctuations. This is done by counter balancing a current sale or purchase by another, usually future, purchase or sale. The desired result is that the profit or loss on the current sale or purchase will be set off by the loss or profit on the future sale or purchase.
A strategy employed in a futures market to reduce risk. Hedging is used to reduce the risk of loss through adverse movements in interest rates, equity markets, share prices or currency rates. It has become an accepted risk management tool.
A risk management technique used to neutralize or manage interest rate, foreign currency, equity, commodity or credit exposures arising from normal banking activities.
An investment strategy designed to reduce investment risk using "call" options, "put" options, "short" selling, or futures contracts. Hedging is usually used by professional investors and institutions.
Diversifying exposure or managing risk through opposing investments.
A mechanism that allows an exporter to take a position in a foreign currency to protect against losses due to wide fluctuations in currency exchange rates.
Making commitments on both sides of a transaction so the risks offset each other.
The reduction of risk, normally in relation to foreign currency or interest rate movements, by making off-setting commitments.
A method by which a purchaser or producer of natural gas or electricity uses a derivative position to protect against adverse price movements in the cash market by locking in a price for future delivery.
To take a position in the futures market opposite a position in the cash market for the purpose of minimizing loss from adverse cash market price changes. A hedge may also take the form of a having a position in the futures market to use as a surrogate for a cash transaction that will occur later.
The taking of offsetting risks.
Securing a transaction against risks, such as fluctuations in exchange rates, by entering into an offsetting hedge transaction, typically in the form of a forward contract.
refers to the process of protecting investment capital, by using another type of investment to cover all or part of the original investment from potential adverse movements in the market. For example, one could use options, futures, swaps or other hedge instruments to protect the A$ value of a portfolio of US shares, against possible depreciation of the US$ relative to the A$. Under such circumstances, hedging activity is a legitimate aspect of prudent financial and investment management. Undertaken on its own, use of such instruments would more correctly be considered to be speculation in derivatives. Statewide's investment policy permits hedging but does not allow speculation.
Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of a protecting position in a related security. For example, a wheat farmer would enter info futures contracts, to lock in a specific price for his wheat at a future date (typically, the time of harvest). This action removes all uncertainty about the price this farmer will receive for his wheat - but if the market price of wheat is higher at the future date, the farmer forgoes the possibility of receiving that higher price.
the effective offsetting of a price or exchange risk inherent in another transaction or arrangement
A hedging transaction is a purchase or sale of a financial product to minimize exposure to currency fluctuations which could result in financial loss. Its purpose is the elimination of losses from currency price fluctuations or the foreign exchange rate (see Forward Contract).
A strategy used to offset market risk, whereby one position protects another.
The practice of undertaking one investment activity in order to protect against loss in another, e.g. selling short to nullify a previous purchase, or buying long to offset a previous short sale. While hedges reduce potential losses, they also tend to reduce potential profits.
A strategy used to reduce or eliminate investment risk.
Any method of minimizing the risk of price change. Since the movement of cash prices is usually in the same direction and about in the same degree as the movement of the present prices of futures contracts, any loss (or gain) resulting from carrying the actual merchandise is approximately offset by a corresponding gain (or loss) when the contract is liquidated.
It is protecting an existing asset position from an adverse future position. A hedger takes an equal and opposite position in the futures market to the one he holds in the equity market.
Transferring the risk of loss due to adverse price movement through the purchase or sale of contracts in the futures markets. The position in the futures market is a substitute for the future purchase or sale of the physical commodity in the cash market. If the commodity will be bought, the futures contract is purchased (long hedge); if the commodity will be sold, the futures contract is sold (short hedge).
Minimising risk by being simultaneously long and short. Perhaps someone is long £50,000 of stock in the cash market and wants to protect this from potential downside risk. To hedge he would sell £50,000 of futures or CFDs, and if the market did go lower any loss on the stock position would be offset by profits on the short position.
The buying and selling of futures contracts so as to protect energy traders from unexpected or adverse price fluctuations.
the purchasing of foreign exchange in anticipation of future price changes. Hedging is an increasingly necessary business expense in times of high exchange rate volatility.
Making or entering into offsetting commitments to minimize the impact of market fluctuations.
Taking an opposite position in the futures market to the one held in the physical market, so that any loss in the physical market will be offset by the corresponding profit in the futures market, thus providing a form of price insurance.
Eliminates an exposure by entering into an offsetting position. For example, a gold mine can hedge exposure to falling prices by selling gold futures. When hedging, we look for highly correlated substitute securities.
A way of reducing the risk of losses that may occur if interest rates, share prices or foreign exchange rates move in the wrong direction. This usually involves the use of CFD or futures contracts.
An investment strategy that combines different types of securities in a given investment portfolio in order to reduce the overall riskiness of the portfolio's asset mix.
The sale (or purchase) of futures against the physical commodity or its equivalent as protection against a price decrease (or increase).
A strategy used to protect against risks involved in investments.
A hedging transaction involves the purchase or sale of a currency to protect it against future fluctuation in the foreign exchange rates.
Taking steps to reduce the risk of financial loss on an investment, mostly in the futures market.
Buying or selling the currency equivalent of a foreign asset or liability to protect its value in the event of depreciation or devaluation.
A hedging transaction is one which protects an asset or liability against a fluctuation in the foreign exchange rate
(Couverture (opération de)) A strategy, usually applied through the use of derivatives, designed to protect against price fluctuations that may arise from changes in foreign currency rates, stock prices or interest rates.
The use of two nearly opposite-direction securities, instruments, or futures contracts as a means of attempting to reduce market risk.
A strategy for reducing the risk of a decline in prices by selling a commodity futures contract in advance of when the actual commodity is sold. Hedger Generally traders involved in the production or marketing of a physical commodity. Hedgers are mainly concerned with protecting themselves against adverse price movements. they could be sellers of futures contracts (e.g. primary producers) or buyers of futures contracts (e.g. a wholesaler or retailer of goods, flour miller or grain merchant). Heel (Dogs) 1. Bite (usually cattle) in the heel to make them move. 2. A command to return to the owner's side.
The balancing of operations in spot cotton, or related products, with offsetting operations in cotton futures, to reduce the risk of loss through price change during the period of merchandising or manufacturing.
Strategy of investing in one or more securities to protect yourself from potential losses in other investments.
A strategy designed to reduce investment risk. Its purpose is to reduce the volatility of a portfolio by investing in alternative instruments that offset the risk in the primary portfolio.
A trade designed to reduce risk, for instance, a put warrant may act as hedge for a current holding in the underlying asset.
Protecting an existing position or commitment.
A means of protection against extensive loss due to adverse price fluctuations. In the futures market, to purchase or sell for future delivery as a temporary substitute for a merchandising transaction to be made later.
The purchase or sale of a derivative security (such as options or futures) in order to reduce or neutralize all or some portion of the risk of holding another security.
Protecting oneself against a risk of loss in respect of a transaction by entering into a countervailing transaction, e.g., when buying an annuity effecting a life assurance to recoup all or part of the annuity purchase money on death.
Making an investment to reduce the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security, such as a futures contract. An example of a hedge would be if you owned a stock, then sold a futures contract stating that you will sell your stock at a set price, therefore avoiding market fluctuations.
A strategy used to minimize exposure to changes in prices, interest rates or exchange rates by means of derivative financial instruments (options, swaps, forward contracts, etc.). See also natural hedges.
Protecting against or limiting losses on an existing shareholding or portfolio by establishing an opposite position in the same or equivalent stock(s).
An investment position taken to counteract the potential risk from another investment.
An investment strategy of lowering risk by buying securities that have offsetting risk characteristics. A perfect hedge eliminates risk entirely. Hedging strategies lower return since there is a cost involved in hedging. For example, a portfolio manager could short a futures contract which will perfectly offset any decrease in the value of the portfolio. Options and short selling stock can also be used for hedging. Hedge funds are investment pools that are free to use any hedging techniques they desire and they often make large bets in a relatively small number of different holdings.
the process of reducing or removing the price risk associated with a particular exposure. Hedging is typically achieved by entering into a derivative transaction whereby the gain (loss) on the underlying position is offset by the loss (gain) on the derivative position. Most hedging activity relates to removing the risk associated with changing interest or foreign exchange rates
Trimming ends of shoots in a vertically shoot-positioned traning system, such as VSP.
The use of derivative instruments to protect against price risk.
A process for reducing the currency exposure of an investment portfolio and consequently the adverse effect of the exchange rate fluctuation. Hedging may also be used to reduce risk to a fund from adverse movements in interest rates, markets or share prices.
A strategy used by companies to minimize the potential risks associated with fluctuating commodity prices. A company will “hedge†a portion of its future production to a buyer at a fixed price for a specific time period.
A common foreign exchange trading term used to describe the process of eliminating or reducing exchange risk through the use of foreign exchange instruments such as forward contracts, futures, and options.
undertaking one investment to protect against the potential loss in another investment. Options and futures are often used to hedge an investment.
A strategy that eliminates a risk through the post sale of the risk or through a transaction in an instrument that represents an obligation to sell the risk in the future. The goal is to ensure that any profit or loss on the current sale or purchase will be offset by the loss or profit on the future purchase or sale.
A strategy designed to reduce investment risk using call options, put options, short-selling, or futures contracts. A hedge can help lock in profits. Its purpose is to reduce the volatility of a portfolio by reducing the risk of loss.
Protecting against unfavourable market movement by locking in a foreign exchange rate for settlement on a future date.
A hedging transaction is one whose main aim is to protect an asset or liability against a fluctuation in the foreign exchange rate rather than profit from the exchange rate fluctuations.
To offset or reduce a possible loss by buying and selling other instruments that are likely to rise and fall in opposite directions under the same conditions.
investing in an activity such as options or futures to protect against loss elsewhere
The sale or purchase of future mortgage contracts by a mortgage banker or lender for the purpose of protecting cash transactions made at a future date.
The practice of entering into contracts on a commodity exchange to protect against future fluctuations in the commodity. This practice allows a company to isolate profits to the value-added process rather than to uncontrolled pricing factors.
The initiation of a position in a futures market that is intended as a temporary substitute for the sale or purchase of the actual commodity. The sale of futures contracts in anticipation of future sales of cash commodities as a protection against possible price declines, or the purchase of futures contracts in anticipation of future purchases of cash commodities as a protection against the possibility of increasing costs.
The implementation of a set of strategies and processes used by an organisation with the explicit aim of limiting or eliminating, through the use of hedging instruments, the impact of fluctuations in the price of credit, foreign exchange or commodities on an organisation's profits, corporate value or investments.
Taking a position in a futures market opposite to a position held in the cash market to minimize the risk of an adverse price change; a purchase or sale of a futures contract as a temporary substitute for a cash transaction that will occur later.
The use of almost opposite direction securities, instruments, or futures contracts as a method of attempting to reduce market risk. A perfect hedge is one that eliminates the prospects of any future gains or losses. Investors frequently try to hedge against inflation by purchasing assets (e.g, gold) that will rise in value faster than inflation. See: Futures Contract; Hedge Fund; Inflation; Selling Short
A strategy in which investment risk and thus the volatility of a portfolio is reduced by the use of call and put options, short selling or futures contracts. The hedge can lock in existing profits
The practice of offsetting the price risk in an existing security by the purchase or sale of a derivative security, such as an option or futures contract.
A protective investment strategy, intended to reduce losses from negative price fluctuations. Taking an offsetting position in a related security, such as an option or a short sale, is an example of a hedging strategy. Hedging can also be used in interest rate swaps, currency swaps, and to lock-in gains.
Taking action to neutralize risk. Investors, dealers, and bankers hedge in various markets, including the stock, option, foreign exchange, and commodity markets. Hedging entails controlling the risk of one transaction by engaging in an offsetting transaction.
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) Hedge - Selling futures contracts to protect against possible declining prices of commodities that will be sold in the future. At the time the cash commodities are sold, the open futures position is closed by purchasing an equal number and type of futures contracts as those that were initially sold. and Purchasing (Long) Hedge - Buyer futures contracts to protect against a possible price increase of cash commodities that will e purchased in the future. At the time the cash commodities are bought, the open futures position is closed by selling an equal number and type of futures contracts as those that were initially purchased. Also referred to as a buying hedge.