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Hedging

Hedging is a risk management technique used by investors and companies to reduce the risk of losses from price fluctuations. It involves taking a position in one asset that offsets the risk of another asset. For example, an investor who owns stocks may hedge their portfolio by purchasing a put option on the stock index, which would provide protection against a decline in the stock market.

Companies may also hedge their exposure to currency risk or commodity price risk by using derivatives or other financial instruments. The goal of hedging is not to make a profit, but to protect against potential losses. It's a way to mitigate risk and stabilize returns in a volatile market.

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