Hedging with futures lets a market participant lock in a price and thereby eliminates:
A) Price risk.
B) Basis risk.
C) Credit risk.
D) Liquidity risk.
E) None of the above.

Question

Quizplus · Accepted Answer

Hedging with futures allows a market participant to lock in a price for a commodity, financial instrument, or currency, effectively eliminating price risk. This means the participant is protected against adverse movements in market prices.

Hedging with Futures Lets a Market Participant Lock in a Price