Risk Management
Natural Hedge
Definition
What is Natural Hedge?
Risk reduction created by offsetting business cash flows rather than a derivative.
Example in practice
How This Looks in Practice
A company earning and spending dollars has a natural currency hedge.
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Related Terms
Risk Management
Stress Test
An analysis of portfolio performance under severe but plausible scenarios.
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The estimation of outcomes under a defined combination of assumptions.
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The study of how an output changes when one input changes.
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A model linking expected return to the risk-free rate, market risk premium, and an asset's beta.