Hedging

Question 1

what is hedging?

Answer 1

a way of attempting to insure against a negative event happening

e.g., purchasing car insurance

Question 2

impact of hedging

Answer 2

reduces the negative impact of negative events that may occur

Question 3

example of a form of hedging in finance

Answer 3

getting derivatives (e.g., futures, swaps etc) to protect against uncertain future events