Pegging

1. A method of stabilizing a country's currency by fixing its exchange rate to that of another country.

2. A practice of and investor buying large amounts of an underlying commodity or security close to the expiry date of a derivative held by the investor. This is done to encourage a favorable move in market price.

Investopedia Says:
1. Most countries peg their exchange rate to that of the United States.

2. An investor writing a put option would practice pegging so that he or she will not be required, due to lowering prices, to purchase the underlying security or commodity from the option holder. The goal is to have the option expire worthless so that the premium initially received by the writer is protected.

Related Links:
Baffled by exchange rates? Wonder why some currencies fluctuate while others don't? This article has the answers. Floating And Fixed Exchange Rates
Why would a country choose to implement dual or multiple exchange rates? It's risky, but it can work. Dual And Multiple Exchange Rates
An introduction to the world of options, covering everything from primary concepts to how options work and why you might use them. Options Basics Tutorial
Take advantage of foreign currency markets without stepping out of your house. The New World Of Emerging Market Currencies
Learn how the largest and fastest growing market can work for you. The Forex Market

Stabilizing the price of a security, commodity, or currency by intervening in a market. For example, until 1971 governments pegged the price of gold at certain levels to stabilize their currencies and would therefore buy it when the price dropped and sell when the price rose. Since 1971, a Floating Exchange Rate system has prevailed, in which countries use pegging-the buying or selling of their own currencies-simply to offset fluctuations in the exchange rate. The U.S. Government uses pegging in another way to support the prices of agricultural commodities. See also Parity Price.

In floating new stock issues, the managing underwriter is authorized to try to peg the market price and stabilize the market in the issuer's stock by buying shares in the open market. With this one exception, securities price pegging is illegal and is regulated by the Securities and Exchange Commission. See also Stabilization.