In which market is hedging possible?

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Solution

Dear student,

Hedging acts as a protection in the forward markets where the transactions are to be honored on a pre-determined future date. Usually, hedging is more popular in the share (stock) markets and foreign exchange markets (i.e. international money market), as these markets are highly volatile and are subject to unexpected price fluctuations. The practice of Hedging protects the buyers from price (stock prices or exchange rate) hike and the sellers from the reduction in price (stock prices or exchange rate).

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