The forward sale of a foreign currency to reduce the exchange risk exposure connected with the ownership of an asset denominated in that currency.
The hedge contract may be for a period that coincides with the expected liquidation of the asset, or it may simply be a contract for one, three, six or twelve months to offset the exchange risk for an asset that is expected to be held for a very long term, in which case the choice of the term of the hedge is a matter of relative cost and judgment. For a liability, the forward purchase of a foreign currency.
Hedging