All of the following are methods whereby a hedge is accomplished EXCEPT:
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 as it represents a direct investment and is not used to mitigate risk associated with other assets. The other options, using derivative securities (such as futures or swaps), buying or selling forward contracts, and using options in the cash market, are all methods of hedging.

All of the Following Are Methods Whereby a Hedge Is