Hedge (finance)
Etymology
From Old English hecg, a row of bushes forming a boundary or fence. By the 1600s "to hedge" meant to protect oneself with a boundary, then figuratively to guard against loss by taking a counterbalancing bet — fencing in your risk.
noun · /HEJ/
A deliberate action taken to offset or limit the risk of losing money on another position.
What it names
It captures the logic of not betting everything one way: a hedge accepts a smaller gain in exchange for protection if things go against you.
Example
Buying a little gold was his hedge against the currency losing value.
Related idea
A hedge is often built from a derivative — a contract whose payoff moves opposite to the risk you want to cover.
noun · /HEJ/
A row of closely planted shrubs forming a boundary or barrier.
What it names
the living green fence around a garden or field
Example
A neatly trimmed hedge separated the two gardens.
Related idea
The financial sense grew straight out of this — a hedge is a protective boundary thrown up against loss.
verb · /HEJ/
To avoid committing yourself — to answer or act evasively so as to limit your exposure.
What it names
giving a deliberately noncommittal answer
Example
Asked whether he’d run, he hedged.
Related idea
“Hedge your bets” — cover more than one outcome so no single result can hurt you.