03 February 2023
is a strategy that tries to limit risks in financial assets.
In practice, hedging occurs almost everywhere. For example, if you buy homeowner’s insurance, you are hedging yourself against fires, break-ins, or other unforeseen disasters.
Hedging against investment risk means strategically using financial instruments or market strategies to offset the risk of any adverse price movements. In another way, investors hedge one investment by making a trade in another.