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