The concept of hedging is better understood through the comparison with the notion of insurance; literally, hedging is like insuring oneself against loss.

Question

Quizplus · Accepted Answer

Hedging, in finance, involves making an investment to reduce the risk of adverse price movements in an asset, similar to how insurance protects against financial losses from specific risks, making the comparison apt for understanding the concept.

The Concept of Hedging Is Better Understood Through the Comparison