Hedging in financial markets primarily aims to reduce the:
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- Business risk
- Unsystematic risk
- Market risk
- Country risk
The Correct Option is C
Solution and Explanation
The primary objective of hedging is to reduce market risk (also called systematic risk), which arises due to overall market fluctuations affecting the value of investments.
Explanation of Other Options:
(A) Business risk: Related to internal company operations, not directly addressed by hedging.
(B) Unsystematic risk: Specific to a company or industry, usually reduced by diversification.
(D) Country risk: Related to political or economic instability in a country.
Thus, hedging mainly protects against market risk caused by broad market movements.
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