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What is Hedging?
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Answer / anjali
Hedging means reducing or controlling risk. An automobile
manufacturer purchases huge quantities of steel as raw
material for automobile production. The automobile
manufacturer enters into a contractual agreement to export
automobiles three months hence to dealers in the East
European market.
This presupposes that the contractual obligation has been
fixed at the time of signing the contractual agreement for
exports. The automobile manufacturer is now exposed to risk
in the form of increasing steel prices. In order to hedge
against price risk, the automobile manufacturer can buy
steel futures contracts, which would mature three months
hence. In case of increasing or decreasing steel prices, the
automobile manufacturer is protected. Let us analyse the
different scenarios:
| Is This Answer Correct ? | 14 Yes | 1 No |
Answer / guest
Hedging is the process whereby an investor uses two or more
than two options to minimize or manage his risk.
| Is This Answer Correct ? | 4 Yes | 1 No |
Answer / chandu
hedging is the diversification of risk into various
financial instruments i.e futures,forwards,swaps, etc
| Is This Answer Correct ? | 4 Yes | 1 No |
Answer / vijay kumayadav
Hedging is the protection against the loss.
| Is This Answer Correct ? | 3 Yes | 1 No |
Answer / 1234
Hedging is a financial instrument which is used to convert
certainity in to uncertainity.
| Is This Answer Correct ? | 3 Yes | 2 No |
Answer / ravi julaniya
Superb explaination Anjali......!!!!!!! do u have any email
id??
| Is This Answer Correct ? | 0 Yes | 0 No |
Answer / sanjeeb kumar panda
Making an investment to reduce the risk of adverse price movements in an asset.
| Is This Answer Correct ? | 0 Yes | 0 No |
Answer / anil
hedging means minimizing the risk
the investor having any risk he will be choose hedging for
reducing the risk
| Is This Answer Correct ? | 0 Yes | 0 No |
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