Hedging Strategies

Hedging strategies in financial engineering are methods used to reduce or manage investment risk. Think of it like buying insurance: if you own stocks and fear they might lose value, you might buy options that increase in value if the stocks drop. This way, any losses in your stock investments can be offset by gains from the options. Essentially, hedging helps protect against potential losses, enabling investors and businesses to stabilize their financial outcomes while still participating in markets.