Transactions entered into by investors and other market participants that protect them against specific risks they anticipate in carrying out their business in the future. A hedginghedging Transactions entered into by investors and other market participants that protect them against specific risks they anticipate in carrying out their business in the future. A hedging counterparty is the entity with whom a market participant transacts, who undertakes some or all of the subject risk. counterparty is the entity with whom a market participant transacts, who undertakes some or all of the subject risk.