What Are Natural Hedges?

Natural hedging is the natural adjustment of cash flows in accordance with changes in currency value, which means that the non-systemic risks of various securities can be offset by each other by relying on a huge investment portfolio formed by multiple securities.

Natural hedge

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Natural hedging is the natural adjustment of cash flows in accordance with changes in currency value, which means that the non-systemic risks of various securities can be offset by each other by relying on a huge investment portfolio formed by multiple securities.
Chinese name
Natural hedge
Foreign name
Natural hedge
Explanation
Naturally adjusted cash flow based on currency changes
Meaning
Continuous prevention of exchange rate fluctuation risks
Achieve natural hedging
Hedging with operating financial money market
definition
It is a continuous precaution against the risk of exchange rate fluctuations. If the increase or decrease in the local currency cash flow exactly offsets the depreciation or appreciation of the currency, the expected US dollar cash flow at the exchange rate will remain unchanged. However, such perfect natural hedging is rare. Companies can achieve natural hedging by means of operating, financial or money market hedging.

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