MARKETS GLOSSARY
Hedge
Hedging
Using a financial position or contract to reduce exposure to adverse price or rate changes.
What does Hedge mean?
Using a financial position or contract to reduce exposure to adverse price or rate changes. Professionals may calculate, document or apply this concept differently depending on the transaction, accounting method, lender policy and governing documents. Borrowers should confirm the precise definition used in any term sheet or agreement.
Hedge in context
A borrower may use an interest-rate cap to limit floating-rate exposure.
Why it matters in financing
Hedge can influence how a lender, investor or advisor evaluates risk, pricing, structure, repayment capacity or transaction economics. It should be considered together with the complete financial picture rather than used alone.
Related markets terms
Educational information only. This definition is general, may not match a particular lender or contract, and is not financial, accounting, tax or legal advice.