Which of the following describes a perfect hedge?
A) On net, the hedger can only make money if prices change.
B) On net, the hedger can only lose money if prices change.
C) On net, the hedger can either make or lose money if prices change.
D) On net, the hedger can neither make nor lose money if prices change.
E) On net, prices will not change, so hedging is a worthless exercise.

Question

Quizplus · Accepted Answer

A perfect hedge is one where the hedging strategy completely offsets any potential losses or gains in the underlying asset, meaning the hedger is fully protected against price changes.

Which of the Following Describes a Perfect Hedge