long hedge

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Long hedge

The purchase of a futures contract in anticipation of actual purchases in the cash market. Used by processors or exporters as protection against an advance in the cash price. Related: hedge, short hedge
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Long Hedge

The purchase of a futures contract with the intention of accepting delivery of the underlying asset. One conducts a long hedge in order to lock in a price for an asset one must purchase in the future. This protects the holder of the futures contract from volatility in the underlying asset's price. If the spot price of the underlying asset moves in a direction more beneficial for the holder, he/she can sell the futures contract and buy the asset at the spot price. An example of a long hedge is a situation in which a company needs to buy oil by June. The spot price of oil may be $70 per barrel, but the futures price for June delivery may be only $60. The company would choose to buy the futures contract at $60 per barrel. A long hedge is also called a buy hedge.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

long hedge

The purchase of a futures contract or call option to protect a short position against possible increases in the prices of commodities, currencies, indexes, or securities. For example, an investor might purchase a futures contract on fixed-income securities to protect against a decline in interest rates. Also called buying hedge.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.
References in periodicals archive ?
So, the bets on celibacy in geopolitics are off as far as long hedging goes.
Futures hedging demand are presented with respect to a representative hedger who needs a long hedging to avoid risks from price changes, and the effects of the normality restriction and its relaxation on the estimated hedge ratios will be emphasized.
Then, the piece from S to infinity can be solved directly and the remaining piece from 0 to S can be solved by integration by parts, producing an inverse demand for the long hedging. That is, the expected utility problem can be computed by a numerical double-integral over [[??].sub.1] and [??], and it is maximized with respect to h.
If the hedging components net to zero--that is, if the long hedging component of insurers is exactly offset by the short hedging component of other market participants--then the equilibrium risk premium is zero.