Explanation:
Futures contracts are one of the most common derivatives used to hedge risk. Hedgers enter into futures contracts to reduce the price risk of underlying assets. Hedging is an attempt to “lock-in” the value of an asset and hence guarantee a certain level of return to the investor.
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Q.28 Blackoil Inc. is an American oil-producing company that regularly sells oil futures to reduce the risk of fluctuating oil prices. This activity can be described as:
A
Speculating
B
Hedging
C
Clearing
D
None of the above
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