Found: 4 Items
A transaction that reduces the risk of an investment.
The success of a hedging transaction in reducing risk exposure.
An investment company that uses a variety of techniques to enhance return. The fund will use a variety of leveraging techniques, sell short/long and so on to enhance return, but at a much higher risk.
Reducing risk by offsetting investments with investments of opposite risk. Risks must be negatively correlated in order to hedge each other; for example, an investment with high inflation risk and low immediate returns with investments with low inflation risk and high immediate returns. Long hedges protect against a short-term position and short hedges protect against a long-term position. Hedging is not the same as diversification, as it aims to protect against risk by counterbalancing a specific area of risk in the portfolio.