An action taken by a seller to avoid risks from unforeseeable price fluctuation is known as

In business, there are several risks that can arise due to unforeseeable price fluctuations in the market. One way to avoid such risks is through hedging. Hedging is an action taken by a seller to reduce their exposure to price fluctuations in the market. This is done by taking a position in the futures or options market, which allows the seller to lock in a price for their product or service. This way, even if the market price fluctuates, the seller is protected from any losses. For example, let's say a farmer wants to sell their crop but is worried that the price of the crop will decrease due to factors beyond their control, such as weather, demand, or supply. The farmer can hedge against this risk by entering into a futures contract with a buyer, which guarantees a fixed price for the crop at a future date. This way, even if the market price for the crop decreases, the farmer is protected by the fixed price agreed upon in the futures contract. Therefore, the action taken by a seller to avoid risks from unforeseeable price fluctuation is known as hedging.