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Hedge

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Hedge
A Hedge is typically accomplished by making approximately offsetting transactions that Will largely eliminate one or more types of Risk.
    
In finance, a Hedge is an investment that is taken out specifically to reduce or cancel out the Risk in another investment. Hedging is a strategy designed to minimize exposure to an unwanted business Risk, while still allowing the business to profit from an investment activity. Typically, a hedger might invest in a Security that he believes is under-priced relative to its "fair value" and combine this with a Short sale of a related Security or securities. Thus the hedger is indifferent to the movements of the market as a whole, and is interested only in the performance of the 'under-priced' Security relative to the Hedge.
Posted by  Privatebanking.com
 
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