Where does hedge collide?

A position taken to offset the risk of another position, so that a loss on one side is met by a gain on the other and the net exposure is reduced: to hedge is to give up some potential upside in exchange for protection against an adverse move in a price, rate, or return. Ederington's 1979 The hedging performance of the new futures markets treated the hedge as a portfolio of the spot asset and a futures contract, and measured how far the offsetting contract cut the variance of the combined return. The referent is a deliberate financial arrangement between two positions, valued by the risk it removes, and it is not a qualifying word, a line of shrubs, or a softened request.[1]

Unit

A paired position whose net exposure is smaller than either leg alone

Recovery means

The offset leg gains roughly what the underlying loses, so the combined position holds its value when the hedged price moves against it

Measured by

Assessed by the hedge ratio and by how much the offsetting position lowers the variance or downside of the combined return

A word or phrase that makes a category boundary fuzzy, marking how well something fits a predicate rather than asserting it plainly: expressions such as "sort of," "technically," "loosely speaking," and "par excellence" adjust the degree to which a thing counts as a member of a class. Lakoff's 1973 Hedges: A study in meaning criteria and the logic of fuzzy concepts introduced the term for exactly these operators and analysed how they interact with degrees of category membership drawn from fuzzy set theory. The referent is a semantic device that alters truth-conditional membership, studied as meaning, and it is neither a financial offset, a field boundary, nor, despite the shared surface, a politeness move aimed at the hearer.[2]

Unit

A word that shifts how well something fits a category

Recovery means

Not applicable

Measured by

Analysed by its effect on category membership and truth conditions, using acceptability judgements over graded cases

A device that softens the force of what is said in order to protect face, weakening a request, claim, or criticism so it presses less on the hearer or commits the speaker less: expressions such as "I guess," "if you don't mind," and "kind of" work here as mitigation, not as measures of category fit. Brown and Levinson's 1987 Politeness: Some universals in language usage placed hedges among the strategies that reduce the threat of face-threatening acts in interaction. The referent is an interpersonal, pragmatic move judged by its social effect on face, and although it can borrow the very same words as the semantic hedge, its job is to manage the relationship, not to mark how well something fits a category.[3]

Unit

A softening move that lowers the imposition of an utterance on face

Recovery means

Not applicable

Measured by

Analysed in discourse by the face-threat it mitigates and its uptake, using conversation and speech-act analysis