Which one of the following terms is used in Economics to denote a technique for avoiding a risk by making a counteracting transaction ?
Dumping
Hedging
Discounting
Deflating
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This question was previously asked in
UPSC CDS-1 – 2016
Hedging is an investment strategy used to offset potential losses or gains that may be incurred by a companion investment. It involves taking an opposite position in a related asset or derivative. The term describes a technique for avoiding a risk (like price fluctuations) by making a counteracting transaction to protect against that risk. Dumping refers to selling goods at an unfairly low price. Discounting relates to calculating present value or deducting interest. Deflating is a reduction in the general price level.