Accountancy Forum

what is hedging ?

Ice Blue

Hi,
hedging means reducing the risk of loss involved in holding an investment(specially in case of shares).you know whenever someone holds the shares of a company there is chance that the market prices of these shares will fall/rise...if market prices will fall in the future (below holders purchase price) there will be a risk of loss for the investor...to reduce this risk different method are adopted called "hedging"...
in other words you can say that hedging is a type of insurance particular to investment in shares...

Ace

thanks indeed

Ice Blue

well!!!
hedging refers to offsetting a potential position by traking alternative measures <which are many>.so you can see that in hedging we have information about our present position(a potential risk which everybody calls exposure;i dont agree with this term> & what we do is that we neutralize/protect our present position by taking a present decsion.if we take a future position about our financial conditions we are speculating <such as india will loose at sharjah n Pak will win>
its not over baby.......
round n round it goes where it stops nobody knows...

regards
ahsan satti

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what is hedging ?

Ice Blue
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Please have a look on this article - it should clear your concept.

http//www.finpipe.com/hedge.htm