What is Hedging?
Also known as: risk insurance
Entering into a transaction in the direction opposite to the main position in order to reduce the loss from changes in a price, exchange rate or interest rate. The aim is not to make a profit but to make the outcome predictable: if the main transaction makes a loss, the hedging transaction makes a profit that offsets it, and vice versa. This has a price: if the price moves in a favourable direction, the hedge also takes away the extra gain. Derivative financial instruments are often used for this; the forward contract in the example below is one of them.
Source: Britannica Money: The theory and practice of hedging; Merriam-Webster Legal Dictionary: hedging