In a ________, the objective is to alter a current or anticipated stock portfolio position so that its ________ is zero.

Question

Quizplus · Accepted Answer

The objective of a hedging strategy is to reduce or eliminate the risk of price fluctuations in an asset or portfolio by taking an offsetting position in a related security. The measure of sensitivity of a stock or portfolio's returns to changes in the market is called beta. Therefore, in a hedging strategy, the objective is to alter the current or anticipated portfolio position so that its beta is zero. This would effectively eliminate the market risk component from the portfolio, leaving only the unique risk.

In a ________, the Objective Is to Alter a Current