Hedging is:

Multiple Choice

• Plotting how the value of a firm is affected by changes in prices.

• An option that gives the owner the right, but not the obligation, to buy an asset at a specific price up to a specific point in time.

• A financial asset that represents a claim on a different type of asset.

• Plotting the potential gains and losses incurred as a consequence of price changes.

• Reducing a firm's exposure to rate and price fluctuations.