Countertrade or covering transaction designed to offset an existing or potential risk position by eliminating or diminishing the element of risk , in particular price, interest rate or exchange rate risks. Risk compensation is achieved by incurring a similar yet countercurrent risk to that entailed by the position to be hedged.
Future transactions are classic examples of hedging instruments.
Securities portfolios can be hedged with financial derivatives. The hedge ratio is the converse of the delta. They are therefore generally acquired only by large investors. HKFE Hong Kong Futures Exchange. The execution of banking transactions by customers from their homes. telebanking .