Natural Hedge is a method of reducing economical risk by using two different economical equipments whose performances tends to terminate each other out.
A Natural Hedge is compared with other types of bushes in that it does not require the use of innovative economical loans such as sends or types. On the other hand, most bushes (natural or otherwise) are partial, and do not remove risk completely.
It is the reduction in risk that can occur from an institution’s normal operating techniques. An organization with significant sales in one country keeps an all-natural protect on its Forex risk if it also produces expenses in that Forex. For example, an oil manufacturer with improving functions in the US is (partially) naturally hedged against the cost of dollar-denominated raw oil. While an organization can modify its functional behavior to take advantage of an all-natural protect, such bushes are less versatile than economical bushes. A Natural Hedge is the reduction in threat that can occur from an institution’s normal operating procedures. A company with significant sales in one country keeps a Natural Hedge on its Forex threat if it also produces expenses in that Forex.