Hedge

A conservative strategy used to limit financial loss by effecting a transaction that offsets the underlying position. A hedge correlates with the risk so a profit made on a futures or option contract mitigates the loss on an investment or activity. See WEATHER DERIVATIVES.

Hedging

A kind of Insurance by which risk of a trader is shifted on another trader, similar to speculation and may be used to handle risks not subject to insurance, such as price-change risks.