Resources  ❯  Accounting Terms

Hedge

[hej]

What is the definition of Hedge?
A transaction or series of transactions undertaken to reduce the risk of an investment, often by taking an offsetting position in a related security.
Using Hedge in an Example

A common example of a hedge is when an investor buys a stock and simultaneously purchases a put option on the same stock. This strategy can protect against potential losses in the stock's price by giving the investor the right to sell at a predetermined price.

Using Hedge in a sentence

To safeguard our portfolio from sudden market downturns, our financial advisor recommended that we hedge our largest stock investments.

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Half-Life

In the context of mortgage-backed securities, half-life refers to the point in time at which half of the principal amount of the security has been repaid.
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Head of Household

A tax filing status for individuals who are unmarried and provide more than half of the financial support for their household, which may include dependents or other qualifying relatives. This status offers more favorable tax rates and higher deductions compared to single filers.
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Held-to-Maturity Security

A debt security that a company has the intent and ability to hold until its maturity date, at which point it is expected to be paid in full.
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High-Low Method

A technique used in cost accounting to separate fixed and variable costs associated with a business activity by analyzing the highest and lowest points of activity and their corresponding costs.
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High-Premium Convertible Debenture

A type of bond that features a long-term maturity, offers a high premium for conversion into common stock, and provides a competitive interest rate.
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Historical Cost

The original cost of an asset to an entity at the time of its acquisition, recorded on the financial statements.
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Holding Period

The duration between the acquisition and the sale or disposition of an asset by a taxpayer.
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Hope Scholarship Credit

A tax credit available for the first two years of post-secondary education, providing a maximum credit of $1,500 per student per year, contingent upon meeting specific eligibility requirements.
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Horizontal Analysis

A financial analysis technique that compares line items in financial statements over a series of periods, calculating both the dollar amount and percentage changes from one period to the next.
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