Hedging Is Use of Financial Instruments Such as Options, Forwards

question 14

True/False

Hedging is use of financial instruments such as options, forwards, futures, and swaps to reduce the financial risks faced by a firm.

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Definitions:

Neutral Stimulus

A stimulus that initially produces no specific response other than focusing attention; in classical conditioning, it becomes associated with an unconditioned stimulus.

Operant Conditioning

A method of learning that occurs through rewards and punishments for behavior, emphasizing the effects of consequences on behavior.

Conditioned Stimulus

A previously neutral stimulus that, after association with an unconditioned stimulus, elicits a conditioned response.

Conditioned Response

A learned reaction to a previously neutral stimulus, obtained through repeated association with an unconditioned stimulus.