Super Hedging

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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RELATED FAQS
  1. What happens if you don't hedge your investments?

    Learn the purpose, advantages and disadvantages of hedging, and find out how to utilize hedging to enhance an overall investment ... Read Answer >>
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    Understand the concept of hedging and learn how this key element to portfolio management can help an investor protect profits ... Read Answer >>
  3. What are the most effective hedging strategies to reduce market risk?

    Learn about different hedging strategies to reduce portfolio volatility and risk, including diversification, index options ... Read Answer >>
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