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A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment. A hedge can be constructed from many types of financial instruments, including stocks, exchange-traded funds, insurance, forward contracts, swaps, options, gambles, [1] many types of over-the-counter and derivative products, and futures contracts.
The word "hedge", meaning a line of bushes around the perimeter of a field, has long been used as a metaphor for placing limits on risk. [9] Early hedge funds sought to hedge specific investments against general market fluctuations by shorting other, similar assets.
Hedging is an investment strategy that is simple in concept but that can be difficult in execution. The primary uses of hedging strategies are to either lock in a profit or to protect against a...
Hedges can also allow speakers and writers to introduce (or occasionally even eliminate) ambiguity in meaning and typicality as a category member. [2] Hedging in category membership is used in reference to the prototype theory, to signify the extent to which items are typical or atypical members of different categories. Hedges might be used in ...
A foreign exchange hedge transfers the foreign exchange risk from the trading or investing company to a business that carries the risk, such as a bank. There is a cost to the company for setting up a hedge. By setting up a hedge, the company also forgoes any profit if the movement in the exchange rate would be favourable to it.
Hedge accounting is an accountancy practice, the aim of which is to provide an offset to the mark-to-market movement of the derivative in the profit and loss account.
The stock market has soared this year, but for hedge funds in 2013, gains haven't been forthcoming. One report puts the average return for hedge funds in 2013 as of November at just 7%, quite a ...
Fuel hedging is a contractual tool some large fuel consuming companies, such as airlines, cruise lines and trucking companies, [which?] ...