Hedging is:
A) Plotting how the value of a firm is affected by changes in prices.
B) An option that gives the owner the right, but not the obligation, to buy an asset at a specific price up to a specific point in time.
C) A financial asset that represents a claim on a different type of asset.
D) Reducing a firm's exposure to rate and price fluctuations.
E) Plotting the potential gains and losses incurred as a consequence of price changes.

Question

Quizplus · Accepted Answer

Hedging is a strategy used by firms and investors to reduce their exposure to various risks, including fluctuations in interest rates and prices. This is achieved by taking positions in financial markets that offset potential losses in their primary investments or operations.

Hedging Is