Börsenlexikon: Hedging

Hedging is the term used to describe the hedging of risks. Individual securities or entire securities portfolios can be hedged. Hedging is the counterpart to trading, as speculation is also called. The persons carrying out the hedging are known as hedgers. The futures exchanges are particularly suitable for limiting risk. For example, if someone exports goods to the USA in March and will be paid in dollars in six months' time, they can already sell these dollars against Swiss francs or against another currency at a fixed rate. To do this, one sells the desired quantity of contracts in dollars on the futures exchanges for delivery in September. This determines how much Swiss francs one will receive for the dollars. The important thing about this hedge is that you can calculate the costs in advance. Generally, the further in the future the delivery date lies, the higher the costs. If necessary, you can also hedge only a part of the dollar values. The procedure for hedging individual securities is similar. It is more common to hedge a portfolio with the help of options, warrants and futures on indices. This is a way of hedging against stock market losses. The increase in value of the derivatives in a stock market correction absorbs at least part of the price losses of the shares. This hedging also costs money, of course, which reduces the return on the overall portfolio. The prerequisite for this hedging is, of course, that the portfolio structure roughly corresponds to the composition of the index.