There are two types of diversification: a. Hedging, in which investors reduce idiosyncratic risk by making investments

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There are two types of diversification:

a. Hedging, in which investors reduce idiosyncratic risk by making investments with offsetting payoff patterns.

b. Spreading, in which investors reduce idiosyncratic risk by making investments with payoff patterns that are not perfectly correlated.

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Money Banking And Financial Markets

ISBN: 9781260226782

6th Edition

Authors: Stephen Cecchetti, Kermit Schoenholtz

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Question Posted: Mar 21, 2024 02:01 AM

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There are two types of diversification: a. Hedging, in which investors reduce idiosyncratic risk by making investments

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Money Banking And Financial Markets

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