________ is the use of derivative securities to take positions in financial markets that offset the underlying sources of risk that arise in a company's normal course of business.

Question

Quizplus · Accepted Answer

Hedging is the use of derivative securities to take positions in financial markets that offset the underlying sources of risk that arise in a company's normal course of business. By hedging, companies can protect themselves against adverse movements in prices or interest rates, for instance, and ensure more stability in their financial outcomes. Risk management is a broader term that encompasses all the activities companies engage in to identify, measure, and control the various risks they face. Asset securitization and option premium, on the other hand, are more specific concepts related to structured finance and options trading, respectively.

________ Is the Use of Derivative Securities to Take Positions