Chinese hedge(redirected from Reverse Hedges)
In arbitrage, the practice of taking a short position on a convertible security and taking a long position on the underlying asset of that convertible security. The investor makes a Chinese hedge in hopes that the price of the underlying asset will fall, allowing him/her to profit from the decrease in the price of the convertible security. On the other hand, if the underlying asset rises in price, the investor profits from the increase as well. A Chinese hedge is also called a reverse hedge because it is the opposite of a set-up hedge.