The hedging principle refers to risk reduction by approximately matching the maturities of assets held with the maturities of liabilities taken on.

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The hedging principle, also known as matching principle in finance, suggests that to reduce risk, a company should aim to match the maturities of its assets with the maturities of its liabilities, thereby ensuring that cash flows from assets can be used to cover obligations from liabilities as they come due.

The Hedging Principle Refers to Risk Reduction by Approximately Matching