Question

What is hedging explain it with example ​

Answer 1

Explanation:

hedging is a transfer of risk without buying insurance policies. Hedging employs various techniques but, basically, involves taking equal and opposite positions in two different markets.

For example, if you buy homeowner's insurance, you are hedging yourself against fires, break-ins, or other unforeseen disasters. Portfolio managers, individual investors, and corporations use hedging techniques to reduce their exposure to various risks.

Answer 2

A hedge is an investment that is made with the intention of reducing the risk of adverse price movements in an asset. Normally, a hedge consists of taking an offsetting position in a related security.

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