SIE Exam Question 860: Answer and Explanation

Question: 860

Which of the following is an investment strategy entered into to reduce or offset the risk of adverse price movements in a security by taking an offsetting position in another investment?

• A. Arbitrage
• B. Derivative
• C. Option
• D. Hedge

Correct Answer: D

Explanation:

A hedge is an investment strategy entered into to reduce or offset the risk of adverse price movements in a security by taking an offsetting position in another investment.