Quick Definition

In finance, an offset refers to the process of canceling or nullifying the impact of one asset or liability by using another. It is commonly used to manage risk or reduce exposure.

Examples

• 1A bank offsets a potential loss from a bad loan by holding collateral of equivalent value.
• 2An investor offsets the risk of a stock portfolio by purchasing put options.
• 3A company offsets its currency exposure by engaging in currency swaps.
• 4A credit card company offsets the risk of non-payment by setting credit limits based on the customer's credit score.

Tags