Hedging protects firms from spot market unpredictability.

Question

Quizplus · Accepted Answer

Hedging is a strategy used by firms to reduce the risks associated with unpredictable changes in the spot market by making offsetting investments or trades. Hedging can help protect companies from sudden changes in commodity prices, interest rates, or foreign exchange rates, among other factors, which can negatively impact profitability and cash flow. By hedging, firms can better manage their risks and minimize their exposure to market volatility.

Hedging Protects Firms from Spot Market Unpredictability