Analysis of the function of Hedging in the Futures Market - Dissertation Example

The author of the dissertation "Analysis of the function of Hedging in the Futures Market" begins with the introduction where shows her concern that Individual investors, business establishments and portfolio managers are all exposed to price risks, which they counter or minimize by hedging in the futures market. Though not meant for making money, hedging has proved to be a good option for reducing price risks consequently minimizing losses. Besides guarding against price risks, hedging, when executed prudently, can bring in multiple benefits like stabilizing market volatility, absorbing unexpected market pressures and even providing competitive edge during depressed market conditions and when price wars intensify.

The futures market acts as the platform, which the investors use for minimizing risks and following exponential growth in hedging, the futures markets have become increasingly popular in recent years. However, hedging is not so simple as it appears and there are no sure shot formulas to always win at it either. Today, hedging can make or break an organization or an individual investor and as such adequate knowledge of the roles and technicalities of hedging in the futures market is of paramount importance.

As a result of globalization today’s enterprises are increasingly facing various risks over time like risks in prices and productions. These risks not only affect the enterprises but also extend to the individual investors and portfolio managers who put money in the stocks of the companies (5).