Hedging consists of reducing the risk involved in owning an asset or commodity by making an offsetting sale of that asset.

Question

Quizplus · Accepted Answer

Hedging typically involves taking an equal and opposite position in a related asset or derivative, with the goal of reducing the potential losses or volatility associated with owning the original asset. This can involve selling a stock or commodity, buying a put option, or engaging in other types of financial transactions that offset the risk of the underlying asset.

Hedging Consists of Reducing the Risk Involved in Owning an Asset