Cost Management
How Risky is Risky?
Our free answer is, "That depends." Seriously though, defining risk and risk tolerance is a very personal thing that varies from company to company. One thing is for sure: "Hedging is Risky!" is a myth. When you buy "at the index" your company is 100% at risk for variations in the market price. That's a fact.
Price Risk Management is the active management of the risk associated with market price movements for our Clients. In general, it is the nature of price hedging that in exchange for protection from adverse price movements, you forego the opportunities associated with favorable price movements. However, in some instances, price risk management involves taking risk to obtain greater economic benefit. "Management" is the key word!
ABQ utilizes physical purchase commitments, exchange traded futures and options contracts, and other financial derivatives to hedge its portfolio decisions. We also work with our Clients to develop price objectives