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Hedging
Hedging means reducing exposure to an unwanted risk, such as a currency move or price fall, by taking an opposite position, often using derivatives. A hedge sacrifices some potential gain in exchange for protection.
Why It Matters
A hedge is insurance; it costs something in good times so it pays off in bad ones.
In India
An Indian importer expecting to pay dollars in three months might buy dollars forward to protect against a weaker rupee.
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