Business and Personal Finance Dictionary

# A B C D E F G H I J K L M N O P Q R S T U V W X Y Z 

• NATURAL HEDGES
  
  Balance sheet hedge activity done by altering asset and/or liability repricing characteristics or volumes to reduce the entity's interest rate risk exposure without purchasing derivative hedge instruments such as interest rate swaps or futures. The opposite of natural hedging is capital markets or derivatives hedging. Note that some bankers use the term "natural hedges" more narrowly than others. As narrowly defined, a natural hedge is one in which the rate risk in one piece of customer business is offset by the rate risk in another piece of customer business. Thus a hedge involving the investment portfolio is not a natural hedge under the most narrow definition of the term.
  
  Back