Risk Management
Hedge
Definition
What is Hedge?
A position intended to offset or reduce another exposure.
Example in practice
How This Looks in Practice
An importer buys dollars forward to hedge currency riskThe possibility that exchange-rate movements will change an investment's value in the investor's home currency..
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Related Terms
Risk Management
Stress Test
An analysis of portfolio performance under severe but plausible scenarios.
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The estimation of outcomes under a defined combination of assumptions.
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The study of how an output changes when one input changes.
Portfolio TheoryCapital Asset Pricing Model
A model linking expected return to the risk-free rate, market risk premium, and an asset's beta.