When a trader who is facing financial or legal troubles hedges his or her position in an investment with a ticket to a tropical location (such as Rio de Janeiro). The idea behind the Rio hedge is that if the investment goes bad (either legally or through financial loss) the investor will use the ticket to escape.

The Rio hedge is a joke in the investment community regarding the risks involved in trading. A traditional hedge will protect against potential financial risks associated with an investment. The Rio hedge pokes fun at protecting against risks, such as getting caught by the authorities, lenders, or owners of the funds under management.