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Chapter 16: Q.13 (page 406)

What does it mean to hedge a financial transaction?

Short Answer

Expert verified

To participate in a monetary exchange that lessens or dispenses with hazard.

Step by step solution

01

Concept

Several risks are involved in making investments and financial transactions. the value of an asset make decline and the investors may have to incur a loss. Investors often take certain steps to protect themselves from such risks.

02

Step 2:- Explanation 

Hedging is a method or tool used to reduce the risk of loosing money when making an investment or financial transaction. The process of hedging involves protecting trnasactions thorrugh tools such as insurance, options, swaps, stocks, etc.

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