Hedge

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Hedge

A transaction that reduces the risk of an investment.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

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.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
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 ?
The attraction to the animals may have started with a video game -- ''Sonic'' is a blue hedgehog who runs at supersonic speeds and curls into a ball to attack its enemies -- but it has grown through people sharing pictures of their pets on social media and elsewhere online.
"Whether it's a reduction of 35 million or 10 million, the fact remains that the hedgehog population is declining at an alarming rate," said ecologist Hugh Warwick.
All the 160 hedgehogs identified so far have been given nail polish markings in various colour codes.
"What people can do for hedgehog conservation is the usual; keep a portion of their garden untidy, leave gaps in their fence so that hedgehogs can get from one garden to the next, and if they really want to get stuck in, get involved in their local planning system and work towards a planning system that is truly sustainable."
We already have over 13,000 Hedgehog Champions who have signed up across the UK to improve their area for hedgehogs.
WE WERE pleased to see in the Daily Post (May 31) your article on allowing some stinging nettles in the garden to help wildlife such as hedgehogs - they need all the help they can get!
THE FORESTRY Department has urged motorists to keep a keen eye out for hedgehogs crossing the streets, as the small mammals offer natural pest control and can make great garden companions.
A behavior unique to the hedgehog is anointing or anting.
Clare is the first county in Ireland to have a web-based Biological Records Centre, which along with the Clare Hedgehog Survey, forms part of the Clare Local Biodiversity Action Plan.
In both fruit flies and mice, activating the hedgehog pathway resulted in low-fat animals.
The British Hedgehog Society, in Ludlow, said there are some exceptions to that rule, for example if a nest has been disturbed and the hedgehog is locating, or if a busy mum is taking a break from the nest.