Propose some hedging strategies, and evaluate the outcomes. Should the firm hedge?

When looking to mitigate any potential risks associated with a given situation it is often wise to consider different hedging strategies. Firstly, a firm may hedge their exposure by using derivatives such as futures contracts & options which can then be used to offset any losses incurred due to unfavorable market conditions.

Secondary , one could also take advantage of diversification techniques by investing in multiple asset classes in order to reduce volatility. Additionally , purchasing insurance policies or setting aside capital into special reserve funds is another way for one to safeguard themselves against any sudden losses.

Ultimately , the decision whether or not a firm should hedge depends on various factors such as budget limitations and their overall risk appetite . By taking all of these elements into consideration one can then decide which strategy would be most beneficial for them