Hedge:
Making an investment to reduce the risk of adverse price 
movements in an asset. Normally, a hedge consists of taking 
an offsetting position in a related security, such as a 
futures contract

Funding Agreement:
Funding agreements are marketed to mutual fund companies 
and municipal reinvestments. These products are generally 
used for their security and flexibility as they can be 
altered to meet the specific cash-flow needs of the 
contract holder.

Derivative:
In finance, a security whose price is dependent upon or 
derived from one or more underlying assets. The derivative 
itself is merely a contract between two or more parties. 
Its value is determined by fluctuations in the underlying 
asset. The most common underlying assets include stocks, 
bonds, commodities, currencies, interest rates and market 
indexes. Most derivatives are characterized by high 
leverage.  
Derivatives are generally used to hedge risk, but can also 
be used for speculative purposes. For example, a European 
investor purchasing shares of an American company off of an 
American exchange (using American dollars to do so) would 
be exposed to exchange-rate risk while holding that stock. 
To hedge this risk, the investor could purchase currency 
futures to lock in a specified exchange rate for the future 
stock sale and currency conversion back into euros.