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The concept of hedging is to reduce the risk of financial loss. Hedging originated out of the 19th century commodity markets. A hedge can include stocks, exchange-traded funds, insurance, forward contracts, swaps, and options.

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Q: Concept of hedging
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What is hedging?

The verb to hedge can be used to mean avoiding a direct response, or it can mean counterbalancing against a possible loss (e.g. hedging one's bets). The second meaning is applied to investment strategy.Hedging is a process that is used to reduce risk of loss against negative outcomes within the stock market. Hedging is a similar concept to home insurance, where you might protect yourself against negative outcomes by purchasing fire and peril insurance. The only difference with hedging is that you are insuring against market risks and you are never fully compensated for your loss. This occurs when one investment is hedged through the purchase of another investment. Hedging is most useful under the following circumstances:- Those who have commodity investment that are subject to price movements can use hedging as a risk management technique- Hedging helps set a price level for purchase or sale of an asset prior to that transaction occurring- Hedging also makes it possible to experience gains from any upward price fluctuations to protect against downward price movements.


Difference between hedging and speculation?

Hedging involves in reducing risk in order to focus on another subject, while speculating involves taking on risk in order to profit from insight.


What is currency hedging?

Currency hedging is the activity carried out in order to eliminate the risks stemming from an undesired exposure to a foreign currency. For example, a US investor might want to take exposure to the Japanese stock market, but not to the currency risk related to unexpected movements in the USD/JPY exchange rate. He would then invest in the Japanese stock market and perform currency hedging by selling the Japanese Yen forward, in order to fix today tomorrow's price of the Yen and eliminate the currency risk associated to his position in the Japanese stock market.


What is the meaning and importance of valuation concept?

Valuation Concept is Valuation concept no concept about it.


What is the existence of 1?

It is a mathematical concept. It does not have a concrete existence.It is a mathematical concept. It does not have a concrete existence.It is a mathematical concept. It does not have a concrete existence.It is a mathematical concept. It does not have a concrete existence.