what is hedging in finance

Hedging in finance is a risk management strategy that involves using financial instruments or market strategies to offset the risk of any adverse price movements in an investment. It is a way to limit potential losses by taking an opposite position in a related asset. This can be done through various instruments such as options, futures, and derivatives. The goal of hedging is to reduce and control exposure to risks in financial assets, providing protection against potential losses. It is an important practice used by investors and money managers to manage risk and limit financial exposure