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Basic Question 4 of 9
A hedger takes a position in the futures market in order to ______.
B. decrease a pre-existing risk in search of higher return
C. decrease a pre-existing risk even though doing so may decrease returns
A. increase a pre-existing risk in search of higher returns
B. decrease a pre-existing risk in search of higher return
C. decrease a pre-existing risk even though doing so may decrease returns
User Contributed Comments 4
| User | Comment |
|---|---|
| viannie | Hedge = decrease pre-existing risks which reduces loss but at the same time, reduces returns. (Something got to give, reduce loss but also reduce gains) |
| ankurwa10 | remember, there are no free lunches? You can't have it all. |
| dbedford | Think of it like an investor who buys bonds in thier portfolio to hedge against market risk. Risk goes down for the portfolio and so does potential overall return |
| khalifa92 | good example |
I am using your study notes and I know of at least 5 other friends of mine who used it and passed the exam last Dec. Keep up your great work!
Barnes
Learning Outcome Statements
compare the use of derivatives among issuers and investors
CFA® 2025 Level I Curriculum, Volume 5, Module 3.