n NISM Certifications
XXI NISM Series XXI-A
Medium

Which of the following is true about "Hedging"?

Practice question from NISM XXI A for PMS - Mock Test 1 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. It involves taking an opposite position in a related security to reduce risk

    Correct answer

  2. B

    It guarantees profit in all market conditions

  3. C

    It increases the overall risk of the portfolio

  4. D

    It is only used by speculative traders

Why this is the answer

Hedging is a risk mitigation strategy.

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