Original scientific paper
Autor: Prof. dr Bojan Đorđević, mr Mira Đorđević
JEL: G32, L21
Summary: In this paper we investigate minimization of risk by using futures. In the first section we have shown how short and long hedges replace price risk with basis risk. Examples of hedges are provided. Further, we reviewed cross hedges with maturity and asset mismatches. Simple hedging strategies that result in minimizing the variance of cash flows when hedge is lifted are also considered. The final section of this work considers reasons for the firm to hedge. Hedging activities should only be conducted after clear economic reasons for reducing risk have been articulated.