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Glossary of Investment Terms

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Welcome to the Investment Glossary. We hope you find these terms useful. Should you have a term you would like addressed, please let us know. We would be happy to add it to our list.

H

Hedge  A term used to describe protective manoeuvering by an investment manager. It is intended to reduce the risk of a loss from a specified event; e.g., hedging a currency to protect against detrimental currency movements that would reduce the portfolio return. In a currency hedge, for example, the fund manager who held Yen-denominated stock would buy the Canadian Dollar and sell the Yen exposure (through a forward exchange contract) if he/she favoured the outlook for the Canadian Dollar against the Yen. This in effect protects or "hedges" the currency, while maintaining the Japanese stock market exposure.