Which of the following statements about hedging is (are)true?
I.Hedging is a form of risk transfer.
II.Hedging is used to address the risk of unfavorable price fluctuations.
A)I only
B)II only
C)both I and II
D)neither I nor II

Question

Quizplus · Accepted Answer

I is true because hedging involves transferring the risk of an adverse price fluctuation to another party, such as a futures exchange or a counterparty in a swap. 
II is true because hedging is used to mitigate the risk of price volatility, whether it is the price of a commodity, currency, interest rate, or security.

Which of the Following Statements About Hedging Is (Are)true