Kingswood Motor Co. has a defined-benefit pension plan for its employees. To fund the plan, the company makes periodic contributions to a share investment fund. If the share market declines significantly, the company would have to make additional contributions to make up for lost revenue. The company could hedge its risk of a market downturn by periodically purchasing put options on the share market.

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By purchasing put options, Kingswood Motor Co. would have the right to sell their shares at a set price even if the market declines, providing a form of insurance against market downturns. This would help hedge their risk and potentially reduce the need for additional contributions to the pension plan.