Direct Hedges Financial Glossary
What is it? A form of capital markets or derivatives hedge in which the cash market instrument being hedged is hedged by an options or futures contract on the same underlying instrument. For example, a 91-day U.S. Treasury bill hedged with a Treasury bill future. Because traded futures and options contracts have underlying instruments tied to securities, retail banks do not have much opportunity to use direct hedges to manage the interest rate risk in their loans and deposit portfolios. The opposite of a direct hedge is a cross hedge.Finance Term Definition Added By: Gianna
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