Question

What are the basic strategies used to control risk? Define each (4).

Answer 1

The basic strategies used to control risk include diversification, hedging, asset allocation, and risk management.

Step-by-step explanation:

Basic Strategies to Control Risk

1. Diversification: This strategy involves spreading your investments across different asset classes and industries to reduce the impact of any single investment.
2. Hedging: Hedging involves using financial instruments such as options, futures, and derivatives to offset potential losses in your investments.
3. Asset Allocation: This strategy involves diversifying your investments by allocating them to different classes of assets, such as stocks, bonds, and cash.
4. Risk Management: Risk management involves identifying, assessing, and prioritizing risks, and implementing strategies to mitigate or control those risks.