Hedging

Hedging Definition

Hedging refers to the reduction of an existent risk by the elimination of exposure to price movements in an asset (Goyal, 2009). In other words, hedging is a means of insurance and protection against a business risk by reducing uncertainty over the future path of volatile inputs. It is a financial strategy to reduce the overall risk in a business by taking on an asset position that offsets an existing source of risk.

Hedging Description *

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Strengths, weaknesses and examples of Hedging *

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Hedging web and print resources *

Hedging references (4 of up to 20) *

• Austin, M. C. (2004) Hedging helps airlines deflect higher jet fuel costs. Purchasing, Vol.133(13), pp. 13-14.
• Banks, H. (2015) Yum! Brands, Inc. (YUM) China Troubles Result in Spin Off, China Business News, Oct 20.
• Behrmann, E. (2015) BMW’s Hedging Charge Means Strong Dollar Not Jackpot It Could Be, Bloomberg Business, May 7.
• Carter, D. A., Rogers, D. A., and Simkins, B. J. (2006) Does hedging affect firm value? Evidence from the US airline industry. Financial Management, Vol.35(1), 53-86.

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