Hedging refers to
A) avoiding high-risk investment opportunities.
B) a transaction that reduces risk exposure.
C) the same thing as asset diversification.
D) avoiding the financial futures market.

Question

Quizplus · Accepted Answer

Hedging refers to taking a position in the market that reduces potential risk exposure. It typically involves taking on an offsetting position to an existing investment, such as buying a put option on a stock to hedge against a potential price decline. Hedging allows investors to manage risk without necessarily avoiding high-risk investments or diversifying their assets.

Hedging Refers to