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(1) Most commonly a currency hedge to offset the factor of production cost advantage of a competitor with a depreciating currency. See Competitive Currency Risk. (2) A hedge based on statistically measured sensitivity to a risk factor rather than the number of units of exposure. For example, a globally diversified portfolio may have 20% of its assets allocated to German securities, but its economic exposure to the Deutsche mark may be different depending on the sensitivity of the other assets to changes in the value of the German currency.
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