Question

how is risk affected by using different combinations for hedging, neutrality, exposure positions, etc?

Answer 1

Risk is affected by use of different combination of hedging because different combination of hedging will be leading to neutralizing the risk associated with various investment and hedging will always provide an additional advantage for investors in order to maximize their potential of gaining the returns because hedging can also be aggressive in nature and it is not only defensive so it cannot just minimise the risk but it will also maximize the rate of return.

Different type of neutrality strategies and exposure positions are also leading to to affecting the risk to a large extent because when there will be a very high risk exposure which is naked position and it is not taking any kind of covered position so it will have a higher risk and when the position will be covered it will have a lower risk.

Different type of neutralities are also having a impact upon the risk related to various transactions and it would be leading to exposing investors to different degree of uncertainty so they should always try to adopt by formation of such combination of strategies which are mitigating risk to possible extent and providing them scope of maximizing the rate of return.