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What is a hedge?

  1. A A speculative position taken to maximise profit
  2. B A position taken to offset potential losses in another position
  3. C A type of mutual fund
  4. D A long-term equity investment
Answer

A position taken to offset potential losses in another position

Hedging reduces exposure to an adverse price movement, usually by taking an offsetting position in a derivative. It reduces both downside and upside.

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