In a broader context, a single or combined position which is designed to reduce a specific type of risk, usually at the expense of giving up upside potential. This can be done by making offsetting transactions which have the effect of eliminating one or more types of risk.

In more sophisticated spheres, hedge refers to a single or combined position which is taken to gain from a possible or expected change in a specific spread.

Hedge can be narrowly defined as the partial offsetting of a long position in a financial instrument with a short position in a similar or related instrument.