Hedging FAQ

Below you’ll find some hedging FAQ (frequently asked questions).

What is commodity price risk?
A condition that exists when an adverse change in the price of a commodity would reduce the net worth of a business.

What is hedging?
In the context of commodity price risk, hedging is the transfer of risk to others, usually by trading financial derivatives, by purchasing insurance, or by negotiating contract provisions with business partners.

Why hedge?
Effective hedging reduces risk, which protects a business’ net worth and stabilizes its earnings stream.

Do you have any questions about hedging that others might have too? Feel free to submit them on the contact page. I do my best to respond privately to all legitimate requests. FAQs will be posted anonymously on this page, along with their answer of course!

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