Hedge

Definition - What does Hedge mean?

hedge is a position taken in a security to offset or reduce the risk associated with the risk of another security.

Testopedia explains Hedge

Investors will often try to reduce the risk associated with a security or with the market as a whole. The inherent risk associated with all securities in the market place is known as systematic risk. An investor may look to hedge the risk associated with the market as a whole by purchasing puts on the S & P 500. If the value of the investor's portfolio declines as a result of a decline in the over all market, the value of the puts will increase and the investor will have hedged or reduced their risk.

Connect with us

Testopedia on Linkedin
Testopedia on Linkedin
Tweat www.testopedia.com
"Testopedia" on Twitter


'@Testopedia'
Sign up for Testopedia's Free Newsletter!