Question: Hello, I just need some simple definitions and examples please. Thank you! Hedging What is hedging? What are the three areas of risk exposure that

Hello, I just need some simple definitions and examples please. Thank you!

  • Hedging
    • What is hedging?
    • What are the three areas of risk exposure that a company may use derivative to hedge such risk? Describe each one.

  • Types of derivatives
    • What is a financial future or financial forward? Give three examples.
    • How is a financial future or forward contract used to hedge risk
    • What is a call option? A put option?
    • How is an option used to hedge risk?
    • What is an interest rate swap?
    • How is an interest rate swap used to hedge risk?

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