P
   
   Proxy Hedging
   















 

P

Proxy Hedging

The use of a price- or rate-correlated financial instrument to hedge a particular risk when a direct hedge for that risk is not available. Common proxy hedges are the use of one currency which moves in concert with another to hedge the risk in the other currency. For example, the more liquid Deutsche mark market is often used to hedge Swiss franc exposure. Most proxy hedges are subject to some basis risk.

Glossary * P