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 ?
These hedges were treated as microhedges for financial accounting purposes.
The IRS also contended that since FNMA entered into microhedges to hedge the interest rate risk for specific transactions, and did not enter into a comprehensive program with the business purpose of hedging each element of its interest rate risk, the transactions were not hedges.