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Macro-Hedge

Source: Investopedia
This Article has been Edited for Accessibility

Macro-Hedge

What is 'Macro-Hedge'

An investment technique used to eliminate the risk of a portfolio of assets. In most cases, this would mean taking a position that offsets the whole portfolio. But this technique is difficult in practice because there is rarely one asset that will offset the risk of a broader portfolio, so applying a macro-hedge most likely requires taking an offsetting position in each individual asset.

Explaining 'Macro-Hedge'

Here's an example of a macro-hedge: an index-fund manager believes there will be a loss in the index in the upcoming period. To eliminate the risk of a downward turn in the index, the manager can take a short position in the index fund's futures market that will lock in a price for the index.


Additional Resources

  1. Macro Hedging Of Interest Rate Risk Introduction ... [cs.trinity.edu]
  2. Aggregate Income Risks And Hedging Mechanisms [aida.wss.yale.edu]
  3. Economics 330 Money And Banking Lecture 18 [ssc.wisc.edu]
  4. Risk Management: Profiling And Hedging [stern.nyu.edu]
  5. Just Insurance Through Global Macro-hedging [scholarship.law.upenn.edu]
  6. In Conversation With A Macro Hedge Fund Manager [blogs.isb.edu]