Explain the difference between a long hedge and a short hedge used by financial institutions. When is a long hedge more appropriate than a short hedge?

Long Hedge: It is a hedging strategy wherein the producers and manufacturers lock-in the prices of product or commodity to be purchased sometime in the future. It is also known as input hedge. Long hedge strategy is applied to safeguard one against an anticipated price rise in the future.

Short Hedge: It is a hedging strategy used my manufactures and producers to lock in the price of commodity or product to be delivered sometime in the future. This is done in anticipation of decline in price in the future and to protect margins. It is also known as output hedge.

Long hedge is appropriate when you are supposed to purchase a product in the future and expect price to rise. Hence, by hedging against a price today, they try to cut down the expense due to purchase at a higher price than today's. Similarly, a short hedge is appropriate when you are planning to sell a product or commodity. By hedging against an expected fall in price in future, they prevent selling the product at a lower price.