Micro-Hedge

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Micro-Hedge

The practice of hedging the risk on a particular security or asset. An investor micro-hedges when he/she seeks to reduce the risk associated with a single investment. A common way to micro-hedge is to take a roughly equal but opposite position on the same or similar security. For example, one may take a long position in oil while taking a short position in natural gas. It is important to note, however, that micro-hedging usually has little or no effect on a portfolio consisting of several securities.
References in periodicals archive ?
Some micro hedges existed, such as weather insurance (event insurance) and agricultural futures, but these are narrowly focused.
The execution of IndyMac's hedge strategy, which includes micro hedges on servicing related assets and the mortgage loan pipeline, and duration matching on the balance sheet portfolios, worked well during the current volatile interest rate environment.