DEFINITION of 'Super Hedging'

A strategy that hedges positions with a self-financing trading strategy. In an incomplete market, such as options, the cost of such a strategy may prove too high. The idea of super hedging has been studied by academics, however it's a theoretical ideal and is difficult to implement in the real world.

BREAKING DOWN 'Super Hedging'

A hedging transaction limits investment risk of an underlying asset by using options or futures. The options or futures are bought in opposing postions to the underlying asset in order to lock in a certain amount of gain.

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