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 ?
After working the organic matter into the soil, cover the entire hedgerow area with a 3- to 4-inch layer of straw or coarse wood chips.
Most hedgerows stood about 40 feet tall and 30 to 40 feet across; quite a barrier indeed.
For information on how to join the CPRE hedgerow survey call 0171 976 6433.
This can be as easy, Viellet says, as "gathering some twigs and branches from things that are growing in your area and sticking them in the ground." You can also try layering: bending down and burying a stretch of living branch of a plant you want for your hedgerow and, when it develops roots, transplanting it to the area you've selected.
Lesley Jones, chief executive for Keep Wales Tidy, added: "Hedgerows in Wales have been an important make-up of our landscape for centuries.
"An interconnected network of hedgerows shapes the character of much of our cherished landscapes," said Richard Phips from Keep Wales Tidy.
"There is much in it that we can refute and nowhere does it consider the devastating effect that the removal of the hedgerow will have on the peace and seclusion of the cemetery, a place visited by hundreds of people from far and wide."
Nettle soup, dandelion and burdock, and sloe gin are all examples of traditional recipes that make the most of what the hedgerows have to offer in different seasons."
Our study provides evidence that hedgerow plantings can enhance ratios of beneficial to pest insects compared with weedy areas, where pests were found in significantly greater abundance than beneficial insects.
In an instant I flipped the blind up and ran to secure the mortally wounded bird, and, seconds later, Matt came around the hedgerow. His dirty look had turned into a huge smile.
The aim is to plant 100,000 trees and improve 75 miles of hedgerow across Wales.
Set up in 1997 the Durham Hedgerow Partnership has provided a series of training courses and competitions to help increase interest in the ancient art.