What risk management strategy involves taking an opposing position in a derivative or related asset to offset potential losses in an underlying asset?

Explanation

• Hedging is a risk management practice designed to offset potential losses in an asset position using derivatives like futures, options, or swaps.
• Speculation seeks profits from price volatility; Hedging seeks protection against downside risk.
• Arbitrage involves exploiting price differences of identical assets across different markets to earn risk-free profit.