VATFIN6400 - Financial derivatives: hedging

Hedging is a method of protecting against a financial risk arising from price fluctuations. For example, when a trader has bought but not sold contracts for commodities or financial instruments he holds an open position. »Ê¹ÚÌåÓýapp risk can be hedged by buying an equal and opposite futures contract (i.e. to sell), which offers some (but not complete) protection against the vulnerability of an open position.