interest rate hedging

Interest rate hedging is a financial strategy used by companies or individuals to protect themselves from fluctuations in interest rates. If they have loans or investments sensitive to interest rate changes, hedging involves using financial instruments like derivatives to lock in or offset potential losses. For example, if interest rates rise, a hedge can help keep payments or returns stable, reducing financial risk. It’s essentially a way to manage uncertainty and ensure more predictable borrowing costs or investment earnings.