Hedge

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Hedge

A transaction that reduces the risk of an investment.

Hedge

To reduce the risk of an investment by making an offsetting investment. There are a large number of hedging strategies that one can use. To give an example, one may take a long position on a security and then sell short the same or a similar security. This means that one will profit (or at least avoid a loss) no matter which direction the security's price takes. Hedging may reduce risk, but it is important to note that it also reduces profit potential.

hedge

A security transaction that reduces the risk on an already existing investment position. An example is the purchase of a put option in order to offset at least partially the potential losses from owned stock. Although hedges reduce potential losses, they also tend to reduce potential profits. See also perfect hedge, risk hedge, short hedge, special arbitrage account.
Case Study A hedge that limits potential losses is also likely to limit potential gains. In May 1997 Georgia entrepreneur and billionaire Ted Turner entered into an arrangement whereby Mr. Turner had the right to sell four million of his Time Warner shares to a brokerage firm at a price of $19.815 per share. At the same time the brokerage firm acquired the right to buy the same four million shares at a price of $30.45. This particular hedge, called a collar, established a minimum and maximum value for four million shares of Time Warner owned by Mr. Turner. In other words, the former owner of the Atlanta Braves, Atlanta Hawks, CNN, and superstation WTBS acquired the right to obtain at least $19.815 per share by agreeing to give up any increase in value above $30.45. Time Warner stock subsequently skyrocketed when America Online acquired the firm at a price nearly triple the $30.45 stipulated in the agreement. Thus, the hedge ended up costing Mr. Turner approximately a quarter of a billion dollars. On a positive note, the four million shares represented less than 4% of Mr. Turner's total holdings of Time Warner stock he had acquired when the firm bought his Turner Broadcasting several years earlier.
References in periodicals archive ?
Warwickshire Wildlife Trust's senior hedgehog officer, Deborah Wright, oversees both HIAs and is keen to expand the hedgehog team.
The new officer will be tasked with engaging people of all ages and backgrounds in helping their local hedgehogs by making outside spaces, such as gardens and churchyards, hedgehog-friendly.
s vet corner WITH MARTIN PATERSON OF DONALDSON'S VETS Be aware of hibernating hedgehogs DESPITE the peculiar weather over the last week or so, the changing colour of the trees from green to gold and red confirms that autumn is now progressing at pace.
FAY VASS, British Hedgehog Preservation Society TEL: 01584 890 801
Grow a wide variety of plants - Attract plenty of natural hedgehog food by keeping your garden diverse.
Provide nesting sites: Log and leaf piles, wilderness areas and purpose-built hedgehog homes are ideal places for hedgehogs to nest and hibernate.
WE WERE saddened, though not surprised, to read that only a quarter of people see hedgehogs on a regular basis (Western Mail, June 14).
The British Hedgehog Preservation Society, which is funding the project, hope it will enable the creatures to recolonise the area.
An Instagram account set up by the owners of a hedgehog named Biddy in Oregon has nearly 370,000 followers, while National Geographic Magazine put a hedgehog on the cover of its April edition to illustrate a trend of people owning exotic animals.
The BHPS has produced a poster highlighting dangers hedgehogs face in our gardens to mark this Hedgehog Awareness Week.
Where they could once survive very happily in an urban area, in the middle of quite a lot of houses, they now often find that they are so hemmed in that they can't thrive," said Fay Vass, chief executive of the British Hedgehog Preservation Society.
Though the hedgehog is one of the most familiar animals in Europe where they are also well studied, they have not attracted much attention in the Middle East, including Qatar, notwithstanding that there are twice as many hedgehog species in the region than in Europe.