A position formulated to reduce or eliminate an exposure to risk, generally by taking a position opposite a position that the investor has already assumed is best described as a(n):
A) hedge.
B) short position.
C) long position.
D) open interest.

Question

Quizplus · Accepted Answer

A hedge is a strategy designed to reduce or eliminate risk exposure by taking a position in the market that is opposite to an existing position. This is done to offset potential losses in the original position.

A Position Formulated to Reduce or Eliminate an Exposure to Risk