Hedge (finance)
Also known as: hedging · hedged position · financial hedge
A hedge is an investment position intended to offset potential losses or gains that may be incurred by a companion investment.
Connections3
primary economic purpose of futures contracts
Futures contracts are fundamentally used as a risk management tool to lock in prices and protect against future price volatility of an underlying asset.
Initial stable state in the Minsky cycle
This represents the first stage of Minsky's model where borrowers can meet all debt obligations from cash flows, contrasting with the later stages that lead to a crash.
Motivates participation in futures markets
Hedgers use futures contracts to lock in prices, and their hedging needs can influence the supply and demand balance that leads to contango.