A hedge contract acts as insurance that allows investors to hedge against any risk of financial losses. Hedge contracts are often designed to mitigate the risks of price fluctuations within the market.
Oftentimes, hedging is done to strategize in the investment market that goes out of hand. Sharing similarities, hedge contracts are different from forwarding contracts. While forward contracts follow an agreement on buying and selling quantity, hedge contracts act as insurance against adverse price changes.
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