Which of the following is not a method whereby a hedge is accomplished?
A) Using derivative securities
B) Owning several shares of a company's stock
C) Buying or selling a forward contract
D) Using an option in the cash market

Question

Quizplus · Accepted Answer

Owning several shares of a company's stock is not a method of hedging because it involves taking on more risk by concentrating investments in one asset instead of diversifying across multiple assets. The other options - using derivative securities, buying or selling a forward contract, and using an option in the cash market - are all methods of hedging that can be used to offset risk in other investments.

Which of the Following Is Not a Method Whereby a Hedge