Question

what is hedging ,arbritage and spectulation??

Answer 1

In brief :
hedging is booking your safety for future trade of underlying assets
arbritage is simultaneous purchase n sale for quick profit
speculation is trading based on assumptions/estimation/news/rumours.. involves good amount of risk.. its again short term

Answer 2

Hedging is when you pay a small amount to protect the price of your assets. For example, it takes a farmer 6 months to grow his crops. During those 6 months, the price of the crop may go up or down. So he decides to buy a contract that says someone must buy his crops at a specific market price 6 months from now. Hedging is basically someone buying an insurance policy on their assets.

An Arbitrage is a price difference on the same product but in two different areas. An Arbitrager is someone who makes money off this price difference. Lets say Apple iPhones cost 400 dollars in America, but cost 600 dollars in China (that is an arbitrage). Well theoretically, you could buy a bunch of iPhones in America, fly to China, and sell them off for 600 dollars, thus making 200 dollars per iPhone you sell (making you an arbitrager). Virtually every store you see on the street or in a mall is an arbitrager. Safeway for example, transports produce for you, because you are willing to pay more for eggs and steak than farming towns that grow them. Probably the most important thing to remember about Arbitragers is that they help push products towards their equilibrium price. By buying in areas with low prices, they are raising demand, and thus raise the price. When they sell in areas of high prices, they are raising supply, and thus lowering the price. So technically, arbitragers are good for society because they help push towards equilibrium

Speculation is trying to make money by buying an asset today, and hoping it raises its value tomorrow. The entire stock market is speculation, although they don't like that term, so they call it "investing". You are basically gambling, hoping that whatever you bought gets more expensive so you can sell it back for more money. However, speculation is like the name implies, you are speculating on the price for tomorrow. You don't actually know for sure if a stalk is going to go up or down. For example, lets say I bought 100 shares of American Airlines. Now in a few weeks, tourism might pick up again and so the shares would go up. Or one of their planes might crash and their shares would go down. Nobody knows whether a freak accident might happen in the future and that is why speculation is so dangerous.

Answer 3

Is a means of guiding against future risk associated with currency rate fluctuation in capital market while arbritage is the acting of taking advantage of price reduction of good or services of another country different from the home country or using the exchange rate of a country different from the parent country in trading transactions. Speculataion is a technique or selling strategy use in the stock markets for the purchase of stocks which is usually at a low price with an expectation of a future increase in price and stock value. Some investors use sepeculation in trading as bearm bull or stag in their differen tradint activities.