When a firm hedges a risk it is:
A) eliminating the risk
B) transferring risk to someone else
C) making the government assume the risk
D) none of the above

Question

Quizplus · Accepted Answer

When a firm hedges a risk, it is transferring the risk to someone else, typically through a financial instrument such as options or futures contracts. Hedging does not eliminate the risk entirely, but rather helps to mitigate potential losses. It does not involve the government assuming the risk.

When a Firm Hedges a Risk It Is