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Hedger is risk-aversion; speculator is risk-taking. True False

Hedger is risk-aversion; speculator is risk-taking.

True

False

Solutions

Expert Solution

The answer is true.

Hedgers trade derivatives in order to protect themselves against unfavourable price changes, thus they are risk averse. However, hedging does not guarantee the best outcome in terms of return.

Speculators trade derivatives by betting on future price movements and hope that they will earn profit from future expected price changes.

jeff jeffy answered 2 years ago
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