Definition
The process of shifting financial risk from one party to another through financial instruments or contracts. This allows market participants to manage exposure to price movements, interest rate changes, or other financial uncertainties.
Example Usage
"Farmers use futures contracts for risk transfer, protecting themselves against potential price drops in their crops before harvest.”
Related Terms
HedgingInsuranceDerivatives MarketsOptionsFutures
Tags
Risk ManagementDerivatives
Course Module
Module 1: Introduction to Financial Markets