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CROSS-ASSET HEDGE Definition & Legal Meaning

Definition & Citations:

Aproxy or substitute HEDGE that is used when an exact replicating hedge is not available, generally by identifying a contract (e.g., a DERIVATIVE) that has a high degree of CORRELATION with the underlying RISK exposure requiring protection. Although a highly correlated crossasset hedge introduces elements of BASIS RISK, it reduces or eliminates firstorder MARKET RISKS, including DIRECTIONAL RISK or VOLATILITY RISK. Also known as CROSS HEDGE.


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