Hedging
Definition
Reducing exposure to a risk by taking an offsetting position. Sacrifices some upside to cap downside.
Example
A US firm with euro receivables hedges by selling euros forward — locking in the dollar value.
Reducing exposure to a risk by taking an offsetting position. Sacrifices some upside to cap downside.
A US firm with euro receivables hedges by selling euros forward — locking in the dollar value.