Hedging, the act of taking out a hedge, is a strategy designed to minimise risk. A hedge usually takes the form of a transaction in one market or asset in order to offset possible losses in another. For example, a company might buy a foreign exchange option to protect itself against the risk of fluctuations in spot currency rates; or an importer or processor of a commodity may sell futures contracts to offset losses if prices fall. Those pursuing hedging strategies are known as hedgers.

See also: Speculator, Hedge Fund