hedging

Cultural  

1. The practice by which a business or investor limits risk by taking positions that tend to offset each other. For example, a business stands to lose money if the price of a commodity it holds declines, but it can offset this risk by agreeing to sell a specified amount of the commodity at a set price at some point in the future.

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Hedge funds, which are investment funds usually open only to the very wealthy, grew in the 1990s. The near failure of one such fund in 1998, Long-Term Capital Management, sent shock waves through Wall Street.

Example Sentences

Many airlines shield themselves from volatility in the price of fuel, which makes up a large part of their operational costs, by hedging it, usually using financial derivatives to try to spread their risk.

From MarketWatch

“Trade escalation typically revives investor appetite for hedging assets, particularly in a global environment marked by slowing growth and rising geopolitical polarization,” said Rania Gule, senior market analyst at XS.com.

From MarketWatch

We were intermediating and we were hedging our risk.

From The Wall Street Journal

The draw: Real yields are improving elsewhere around the world as central banks begin to diversify, and there’s a shift in how investors are hedging.

From Barron's

A 2% appreciation in the currency could trim earnings by about 5%, assuming no hedging, though this may be offset by firmer aluminium prices.

From The Wall Street Journal

Related Words

• prevarication