risk hedge

Risk Hedge

The practice of taking opposite positions in two different but similar assets in order to profit from the price movements between them. See also: Hedge.

risk hedge

The taking of an offsetting position in related assets so as to profit from relative price movements. For example, an investor might purchase futures contracts on gold and sell futures contracts on silver in the belief that gold will become relatively more valuable compared with silver over the life of the contracts.

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.

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Japanese editorial excerpts

By modeling any number of factors (P/E ratios, macroeconomic factors, the width of a CEO's ties), SMART rebalancing actively manages a portfolio's beta and also can function as a tail risk hedge, helping lessen big drawdowns during bad times, and without the hefty fees of many tail risk hedging (aka, cover your ass-et hedging) products being offered on the market.

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