Hedging And Price Volatility

In broad terms, reducing a firm's exposure to price or rate fluctuations is called hedging. The term immunization is sometimes used as well. As we will discuss, there are many different types of hedging and many different techniques. Frequently, when a firm desires to hedge a particular risk, there will be no direct way of doing so. The financial manager's job in such cases is to create a way by using available financial instruments to create new ones. This process has come to be called financial engineering.

Check out the "Internet Resource for Derivatives" for information on derivative instruments and markets at www.numa.com..

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