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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.

Hedge Forum
  Hedging and Transfer Pricing
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Hedge Special Interest Group

Special Interest Group


Best Practices - Hedge Premium

Expert Tips - Hedge Premium

Resources - Hedge Premium

Overview of Hedge Fund Investment Strategies

Presentation about Hedging, introducing many terms and strategies:
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2. Four Groups of Hedge Funds Invest...
Usage (application): Hedge Funds, Hedging, Investment Strategies

Financial Derivatives: an Overview

This presentation provides an overview of different types of financial derivatives and about Hedge Funds. The presentation includes the following sect...
Usage (application): Hedge Funds, Financial Derivatives, Investment Strategy

Introduction and Summary of Interest Rate Swap

Explanation of Base Rate Swaps.
A swap is an instrument that allows you to exchange a variable rate of a loan (that is linked to the base rate) f...
Usage (application): Initial Understanding of Interest Rate Swap

Introduction and Summary of Hedging

Explaination of hedging using futures contracts within the context of the London Metal Exchange (LME), thus avoiding liquidity risk....
Usage (application): Initial Understanding of Hedging, Trainings, Workshops

Introduction and Summary of Futures and Stop Loss Contracts

A derivative is a financial contract which derives its value from the performance of another entity such as an asset, index, or interest rate, called ...
Usage (application): Initial understanding of Futures and Stop Loss Contracts









Compare 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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