Hedging ? What Is It, And It?s Uses In Risk Management
Hedging,
understanding the benefits for a risk management solution.
The second of a two part article?.
Before I discuss
the use of hedging to off-set risk, we need to understand the role and the
purpose of hedging. The history of
modern futures trading begins in Chicago in the early 1800’s. Chicago is
located at the base of the Great Lakes, close to the farmlands and cattle country
of the U.S. Midwest making it a natural center for transportation, distribution
and trading of agricultural produce. Gluts and shortages of these products
caused chaotic fluctuations in price. This led to the development of a market
enabling grain merchants, processors, and agriculture companies to trade in
contracts to insulate them from the risk of adverse price change and enable
them to hedge.
The first
commodity exchange was the creation of the Chicago Board of Trade, CBOT in
1848. Since then, modern derivative
products have grown to include more than the agricultural industry. Products include Stock Indices, Interest
Rates, Currency, Precious Metals, Oil and Gas, Steel and a host of others. The origins of the commodity and futures
exchange was created to support
hedging. The role of speculators
is beneficial as they add trading volume and important volatility to what would
otherwise be a small and illiquid market place. You can view a complete listing of the worlds different exchanges
at: , you can call them at (416) 302-6282. or http://www.genuineCTA.com
About the author
Dwayne Strocen is a registered Commodity
Trading Advisor specializing in analyzing and hedging Market and Operational
Risk using exchange traded and OTC derivatives.
View more information
about Risk Management http://www.genuinecta.com/Risk_Management_And_Market_Risk.htm
and a complete listing of World Exchanges http://www.genuinecta.com/World_Exchanges_Commodities_Trading_Advisors.htm
Tags: agriculture companies, cattle country, chaotic fluctuations, chicago board of trade, chicago board of trade cbot, commodities trading, commodity exchange, commodity trading advisor, derivative products, futures exchange, futures trading, gluts, grain merchants, illiquid market, operational risk, otc derivatives, precious metals, risk management solution, stock indices, world exchanges
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I enjoyed reading your blog. It is so interesting reading other peoples personal take on a subject….