A low-cost method of transferring the risk of unanticipated changes in asset prices or interest rates from one investor or institution to another is called:
A) Convergence
B) Hedging
C) Investing
D) Securitization
E) None of the above

Question

Quizplus · Accepted Answer

Hedging is a strategy used to offset or reduce the risk of price movements in assets or liabilities, effectively transferring the risk to another party willing to take it on, often through derivatives like futures, options, or swaps.

A Low-Cost Method of Transferring the Risk of Unanticipated Changes