Hedging transaction

Counter- or hedging transaction for an existing or emerging risk-bearing position; also called hedging transaction. Risk compensation is achieved by taking a similar but opposite risk to the position being hedged (hedging transactions purchase opposite positions in the market in order to ensure a certain amount of gain or loss on a trade). – The forward transaction is the classic case of a hedge transaction. Hedging transactions have been increasingly monitored by the regulatory authorities in recent years and have been subject to regulations with regard to accounting. – See hedging, fair value hedge, financialization, commodity forward contract, futures contract. – See ECB Monthly Report, February 2004, p. 79; BaFin Annual Report 2004, p. 182 f. (supervisory issues); BaFin Annual Report 2009, p. 211 (international efforts to tighten regulation); and the respective BaFin Annual Report, chapter “Supervision of Securities Trading and Investment Business.”

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