In Finance, What is a Hedge

Answer:
In finance, a hedge is a financial tool or method not

designed to avoid responsibility but to increase the chance that an investment strategy will pay off. Usually, this takes the form of making investments in two different markets or enterprises so that if one does not pay off, the other will. Hedges are used to minimize adverse risk by taking advantage of high-risk investments.

Hedges are often employed as a primary strategy of hedge funds, which is when a specific group of investors join forces to make investments with the assistance of an investment manager. However, many investment funds that are called hedge funds today do not actually employ hedging to reduce risk but to increase risk and therefore the potential return on investment.


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