covering risk

(FINANCE) using financial derivatives to guarantee against losses. Typically used by non-traders, such as companies engaged in international commerce, to protect themselves against foreign exchange risk (i.e., the possibility that a customer's currency will decline in value).

BILL: You know, I think that financial derivatives are just a huge sinkhole. The people who trade them are just a bunch of wankers who move bits of paper around but add nothing of value.

ANNA: Well, they do provide some important benefits.

BILL: Name one.

ANNA: Covering risk, for one. If you're an airline, you need those aviation fuel options.

by Abu Yahya April 15, 2010