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You work for an oil refinery. Last year, you bought crude oil contracts at a future price of $50 in order to hedge against a
You work for an oil refinery. Last year, you bought crude oil contracts at a future price of $50 in order to hedge against a potential increase in oil prices. Today, oil prices are negative, and your manager is angry that the refinery is forced to buy oil at $50/barrel. Explain to your manager the idea of hedging and defend your decision to buy future contracts a year ago.
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