Posted in Finance, Accounting and Economics Terms, Total Reads: 360
Macro hedging is an investment strategy which is used to offset the risk of entire portfolio. This process may sound credible but it is very difficult to execute in reality.
If an investor is holding a position in any investment and now he thinks that holding a position will lead to loss. Now in order to offset this potential loss he will hold a position in an asset class which is supposed to act directly opposite to that of the risky investment.
Let’s say that you are holding some shares and you think among those shares some are supposed to make loss in future. Now by following the macro hedging strategy in order to hedge the risk you will hold short position in the same asset.