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Hedging
A transaction or strategy designed to modify an entity's exposure to one or more risks by creating an offset between changes in the fair value of, or the cash flows attributable to, the hedged item and the hedging item, or changes resulting from a particular risk exposure relating to those items.
(1) A hedge involves taking an offsetting position that is expected to be affected by market changes in a similar but opposite manner in relation to an actual or anticipated position.
(2) In some situations, there may be under-hedging or over-hedging.
Synonyms and variations
- Hedge 1.
- Hedge transaction
- Hedging activity
- Over-hedging
- Under-hedging