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. Its purpose is to reduce the volatility of a portfolio, by reducing the risk of loss. The New York Times Financial Glossary

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hedge hedge 2 verb [intransitive, transitive]
1. FINANCE if you hedge a financial risk, you protect yourself against it, for example with futures (= agreements to buy or sell currencies etc on a fixed date in the future at a fixed price) or option S (= rights to buy or sell currencies etc at a particular price within a particular period of time or on a particular date in the future):

• I've never hedged currencies before. But I could see the dollar was getting lower, and I hedged for the first time, betting that the dollar would rise.

• Northwest Airlines saved more than $7 million in fuel costs because it hedged 4.2 million gallons of its fuel purchases for each month by buying futures contracts.

— hedging noun [uncountable] :

• Manufacturers have been doing more hedging because they expect prices for copper to rise.

• sophisticated currency hedging techniques

2. hedge your bets to reduce your chances of failure or loss by having several choices available to you:

• Promoters, uncertain whether losing weight was going to stay popular, hedged their bets by advertising that their products could help you add weight or reduce it.

hedge against something phrasal verb [transitive] FINANCE
if you hedge against, or hedge yourself against, a financial risk, you protect yourself against it by hedging:

• Consumers of a raw material can hedge against price movements through the futures markets.

• Many companies have not hedged themselves against a rising yen.

• Although invested in Europe, they weren't sufficiently hedged against currency changes.

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   An action or strategy designed to minimize risk. A hedge often takes the form of a transaction in one market or asset, which protects against losses in another, e.g. a company buys an FX (foreign exchange) option to protect against the risk to its business of fluctuations in spot currency rates. Those pursuing hedging strategies are known as hedgers.
   ► See also Speculator.

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hedging UK US /ˈhedʒɪŋ/ noun [U] FINANCE, STOCK MARKET
the activity of reducing the risk of losing money on shares, bonds, etc. that you own, for example, by buying futures (= agreements to sell shares for a particular price at a date in the future) or options (= the rights to buy or sell shares for a particular price within a particular time period): »

Originally hedge funds took a more traditional approach to hedging: they bought shares they thought would rise in companies they expected to do well.


Hedging instruments such as futures contracts are priced in dollars.


a hedging policy/strategy/programme

Financial and business terms. 2012.

Look at other dictionaries:

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  • Hedging — Hedge Hedge, v. t. [imp. & p. p. {Hedged}; p. pr. & vb. n. {Hedging}.] 1. To inclose or separate with a hedge; to fence with a thickly set line or thicket of shrubs or small trees; as, to hedge a field or garden. [1913 Webster] 2. To obstruct, as …   The Collaborative International Dictionary of English

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