Southern Groves raises tangerines. To hedge its risk, the firm trades in the orange futures market. This process is known as:

Question

Quizplus · Accepted Answer

The process Southern Groves is using is called cross-hedging. Cross-hedging refers to the practice of hedging a commodity that's similar but not identical to the one being produced or used. In this case, Southern Groves is hedging its risk by trading in the futures market for oranges, which are similar to tangerines.

Southern Groves Raises Tangerines