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hedge definition - finance
A position created when a financial contract is purchased in the futures or options market. The purpose of the hedge is designed to protect against price changes in the actual commodity or financial instrument. By selling a futures contract, a producer or trader can protect against potential price declines. Buying a futures contract protects against rising costs. In essence, a hedge works somewhat like insurance.

Webster's New World Finance and Investment Dictionary Copyright © 2003 by Wiley Publishing, Inc., Indianapolis, Indiana.
Used by arrangement with John Wiley & Sons, Inc.

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