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Hedging in the English language refers to the use of language to express uncertainty or to soften a statement, making it less direct or assertive. This can involve using qualifiers, such as "maybe," "perhaps," or "somewhat," to indicate that a statement is not absolute. Hedging is often employed in conversation and writing to show politeness, avoid commitment, or acknowledge the complexity of a situation. It allows speakers or writers to convey opinions while maintaining a degree of ambiguity.

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Naive hedging is where taking a hedge position without taking into consideration the level of hedging required. The optimal hedging position should be such that the expected position from the hedge perfectly offset the underlying risk. Naive hedging (over hedging) could potentially lead to a substantial gain or loss position from hedging.


What is a naive hedge?

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