Hedge
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Hedge |
12manage reaches 100.000 members |
Description of Hedge. Explanation. |
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Definition Hedge. Description.
A Hedge is the purchase or sale of a Call Option, Put Option or Futures Contract as a temporary substitute for a transaction to be made at a later date. The purpose of a hedge is to avoid or minimize exposure to an unwanted business risk, by purchasing on both sides of a risk, so that any loss in one security is countered by gains in the other securities. A hedge can be seen as some kind of Portfolio Insurance.
Usually it involves the initiation of a position in a futures or options market that is intended as a temporary substitute for the sale or purchase of the actual commodity.
Typical Risks that are hedged are: Interest Risk, Equity Risk, Credit Risk and Forex Risk. Forum Comment on this PageCompare with: American-Style Option | European-Style Option | Call Option | Put Option | Asian Option | Futures Contract | Hedging | Non-Systemic Risk | Systemic Risk | Portfolio Insurance | Short Selling |
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End of description Hedge. An explanation. |
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