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Deflected by the sun Posted 18 years ago
Vocabulary
Financial term: Hedge
Hedge: 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.
Investors use this strategy when they are unsure of what the market will do. A perfect hedge reduces your risk to nothing (except for the cost of the hedge).
Hi, Teachers!
Could anyone of you please provide me a clearer example of the financial term hedge as I can't figure out the one above.
Many thanks in advance,
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.
Investors use this strategy when they are unsure of what the market will do. A perfect hedge reduces your risk to nothing (except for the cost of the hedge).
Hi, Teachers!
Could anyone of you please provide me a clearer example of the financial term hedge as I can't figure out the one above.
Many thanks in advance,
Top answer
Hedge : any technique designed to reduce or eliminate financial risk; for example, taking two positions that will offset each other if prices change.
- Hedge : any technique designed to reduce or eliminate financial risk; for example, taking two positions that will offset each other if prices change.
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2 Answers
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Hedge: any technique designed to reduce or eliminate financial risk; for example, taking two positions that will offset each other if prices change.
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Hedge: any technique designed to reduce or eliminate financial risk; for example, taking two positions that will offset each other if prices change.
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Perfectly understood.
Thank you, Mister Micawber!
Just one more question: what does
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