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What is Hedging

What is Hedging?

Hedging is "Price-Risk Management"

"A position established in one market, to offset exposure to price fluctuations in another market, with the goal of minimizing one's exposure to unwanted risk"

There are 3 primary ways to hedge:

  • "Physical Hedge' = buy ahead of needs
  • "Supplier Hedge" = negotiate for fixed pricing
  • "Financial Hedge" = use futures / swaps