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Derivatives

  Derivatives   |   Terms
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  • September 26, 2020
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Dirty Hedge Instrument

A derivative instrument which cannot be perfectly hedged using available exchange-traded instruments. In other words, the risks associated with such an instrument cannot be fully mitigated with tradable instruments

This could also refer to an instrument whose risk exposure varies over time due to changes in a variable other than the usual underlying variable. For example, in the context of commodity derivatives, crude oil derivatives can be used to hedge natural gas liquids (NGL) exposure.


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