Question

Помогите с английским 31.6 Complete the text with the words in the box.commodity contractsdownside riskhedgingleverageunderlying assetTwo concepts that are fundamental to modern finance are leverage and hedging.1.____is using borrowed money to buy an investment. You invest €100 of your own money and €100 or €1,000 - of the bank's. This gives you enormous profits if your investment is a good one, but also magnifies the 2.____. A lot of leverage in a market increases volatility, If the market moves against you, it's not just your own money you're losing, but the borrowed money as well. So you have to sell shares quickly to minimize losses, and this drives down the market very quickly.3.____means trying to protect yourself against risk. If you hold a lot of shares, foreign currency or 4.____, you'll clearly make money if the price of the asset goes up. But if the price goes down, you'll lose. You can hedge this risk by buying a derivative that is structured to make money as the price of the 5.____ falls. So if the market moves against you, at least you have some protection.

Answer 1

Ответ:

1 leverage

2 commodity contracts

3 hedging

4 underlying asset

5 downside risk

Answer 2

Leverage and Hedging in Modern Finance

Leverage and hedging are two fundamental concepts in modern finance. Let's complete the text by filling in the missing words.

1. Leverage is using borrowed money to buy an investment. You invest €100 of your own money and €100 or €1,000 (of the bank's). This gives you enormous profits if your investment is a good one, but also magnifies the downside risk. [[1]]

2. A lot of leverage in a market increases volatility. If the market moves against you, it's not just your own money you're losing, but the borrowed money as well. So you have to sell shares quickly to minimize losses, and this drives down the market very quickly. [[2]]

3. Hedging means trying to protect yourself against risk. If you hold a lot of shares, foreign currency, or commodity contracts, you'll clearly make money if the price of the asset goes up. But if the price goes down, you'll lose. You can hedge this risk by buying a derivative that is structured to make money as the price of the underlying asset falls. So if the market moves against you, at least you have some protection. [[3]]

In summary, leverage involves using borrowed money to amplify potential profits, but it also increases the downside risk. Hedging, on the other hand, is a strategy to protect against potential losses by using derivatives that profit from the decline in the price of the underlying asset.

I hope this helps! Let me know if you have any further questions.