Hedging is:
A) selling two investments that are both expected to lose
B) buying two investments that are both expected to make a profit
C) taking two positions whose gains and losses will offset each other
D) buying insurance against a fortuitous loss

Question

Quizplus · Accepted Answer

Hedging refers to taking two positions whose gains and losses will offset each other. This is done to minimize the risk of losing money in a particular investment. By taking opposite positions, any losses in one position can be offset by gains in the other position, resulting in a more stable overall return.

Hedging Is