Hedge
ForexDefinition
A hedge is an investment or trade made to reduce the risk of adverse price movements in another position. In forex, a investor might open an investment position in the opposite direction of an existing trade, or use options and futures contracts to protect against downside risk.
Example in context
A UK company expecting to receive $1 million in three months buys a currency option as a hedge to protect against a potential fall in the USD/GBP exchange rate.
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