CounterHedging
CounterHedging is a risk-management approach in which an investor or trader takes additional positions specifically to offset the residual risks introduced by an initial hedge. The goal is to hedge the hedge, reducing basis risk, model risk, or changes in the hedged position’s sensitivity as market conditions evolve.
It typically arises when a primary hedge (such as forwards, futures, options, or swaps) cannot fully offset
Advantages include improved risk control, more robust protection against unforeseen moves, and flexibility in managing complex
CounterHedging is related to concepts such as hedging, delta hedging, cross-hedging, basis risk, and tail risk