Hedging

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Hedging:


Hedging means a transaction undertaken specifically to offset some exposure arising out of the firm’s usual operations. In other words, a transaction that reduces the price risk of an underlying security or commodity position by making the appropriate offsetting derivative transaction.


In hedging a firm tries to reduce the uncertainty of cash flows arising out of the exchange rate fluctuations. With the help of this a firm makes its cash flows certain by using the derivative markets.

 

[rosemarry2]

Hedging:


Hedging means a transaction undertaken specifically to offset some exposure arising out of the firm’s usual operations. In other words, a transaction that reduces the price risk of an underlying security or commodity position by making the appropriate offsetting derivative transaction.


In hedging a firm tries to reduce the uncertainty of cash flows arising out of the exchange rate fluctuations. With the help of this a firm makes its cash flows certain by using the derivative markets.

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Please check attachment for Importance and Benefits of Hedging, so please download and check it.