Question:medium
Hedging in financial markets primarily aims to reduce the:
Hedging in financial markets primarily aims to reduce the:
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Hedging strategies are designed to protect investments from market-wide price volatility.
Updated On: Jan 14, 2026
- Business risk
- Unsystematic risk
- Market risk
- Country risk
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The Correct Option is C
Solution and Explanation
Hedging is a strategy employed in financial markets to mitigate or counterbalance the potential for unfavorable price shifts.
The principal aim of hedging is to decrease market risk, also known as systematic risk, which stems from general market volatility impacting investment valuations.
Additional Options Explained:
(A) Business risk: Pertains to a company's internal operations and is not directly managed through hedging.
(B) Unsystematic risk: Is specific to individual companies or industries and is typically addressed by portfolio diversification.
(D) Country risk: Involves risks associated with political or economic instability within a particular nation.
Therefore, hedging primarily serves to safeguard against market risk stemming from widespread market fluctuations.
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