Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

Hedging definition

What does Hedging mean? In legal practice, hedging describes arrangements used by a business or investor to reduce or neutralise an identified financial exposure by taking an offsetting position that delivers the opposite payoff to the underlying risk. Its purpose is loss prevention or risk minimisation, not speculation. Hedges are commonly implemented through derivatives (for example, interest rate swaps to hedge floating‑rate loans, foreign exchange forwards for currency receivables, or commodity hedges), or via natural hedges that match assets and liabilities. Key legal features include: clear identification of the exposure; proportionality (avoiding over‑ or under‑hedging); basis risk; robust documentation (often under an ISDA Master...

Aligning ISDA hedging with loan documents: Events of Default, termination on repayment, ring‑fencing, confirmations, credit support and securitisation—practical guidance for financing lawyers

Published by a LexisNexis Banking & Finance expert

Practice notes

Background

Loan deals are hammered out over an extended timeframe. Hedging is commonly arranged to underpin the borrowing, for example using an interest rate swap to switch a floating rate (often compounded SONIA (Sterling Overnight Index Average) or another Risk Free Rate (RFR)) under the facility agreement into a fixed rate. Yet it is typical for the hedging documents to appear only at the close of the transaction, framed as a condition precedent to drawdown of the loan and presented as a 'standard' form to be signed. This Practice Note explores the drawbacks of accepting that practice and explains how, by reviewing the International Swaps and Derivatives Association (ISDA) paperwork in the context of the facility agreement and other finance documents, parties can align terms to achieve a coherent position that mirrors the commercial bargain...

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Ruth Marken

CMS

Ruth is a Partner in the Finance Group at CMS. She previously worked at Slaughter & May in London and Paris.Ruth advises on the full range of financing transactions, with expertise in acting for corporate and fund clients in the real estate and TMT sectors. She has a particular focus on complex structured transactions including derivatives.Ruth has been described in The Legal 500 directory as "outstanding".Some of Ruth's key transactions include advising a music publishing business on the securitisation of its receivables generated by music catalogues, a transaction which required a deep understanding of the music publishing business and its cashflows; advising an international television production group on its acquisition and production facilities; and advising a leading global manufacturer of IT products on taking security over international intellectual property....

Chris Clark

CMS

Chris is a partner within, and head of, the Capital Markets and Derivatives team at CMS UK and has a broad range of experience in advising leading investment banks, corporates and other financial institutions on a wide range of OTC derivatives, debt capital markets transactions, structured products linked to a range of asset classes and structured finance transactions. Chris specialises in derivative securities and advises on, amongst other things, the drafting and structuring of proprietary indices including advising on regulatory considerations in respect thereof (including, without limitation, the EU Benchmarks Regulation) and the drafting of structured products or transactions referencing such indices/strategies. Chris also regularly assists clients in the negotiation of a wide range of master agreements (ISDA, GMRA, GMSLA) and bespoke structured transactions entered into in connection with such agreements. In addition, Chris advises both issuers and dealers on the issue and...

Yasmin Hook

CMS

Yasmin is an associate in the Corporate and Leveraged Finance team within the CMS Finance Practice Group. Yasmin specialises in corporate finance including, TMT finance, acquisition and real estate finance, corporate and platform lending. Yasmin regularly assists a broad range of clients from major UK and international banks, international specialist lenders, leading corporates, SME’s, founders and private clients with their ongoing finance activities (both Borrower and Lender side). Yasmin also has a corporate background including experience acting for UHNWI’s, board members, shareholders and alternative finance providers....

Web page updated on 21/05/2026

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