Question

What is hedging?

Answer 1

Solution:-Hedging is one type of investment in risk management system.Hedging is an investment taken out to limit the risk of another investment, insurance is an example of a real-world hedge.A hedge is an investment that protects your finances from a risky situation. Hedging is done to minimize or offset the chance that your assets will lose value. It also limits your loss to a known amount if the asset does lose value. It's similar to home insurance. For example, when you buy life insurance to support your family in the case of yourdeath, this is a hedge. You pay money in monthly sums for the coverage provided by an insurancecompany. Although the textbook definition of hedging is an investment taken out to limit the risk ofanother investment.