Hayenga, Marvin L.; DiPietre, Dennis D.

Journal of Futures Markets Vol. 2 no. 2 (1982): 131-140.

Hedging has long been recognized as a means by which the risks of price variability can be reduced. In the classic case, equal and opposite price risks for a given commodity are assumed in the cash and futures market so that the value of the gains in one market perfectly offset the losses in the other. Assuming equal and opposite price risks in two markets is made possible by the development of organized markets in the trading of futures contracts. A commodity futures contract is the instrument by which the transfer of price risk from hedgers to speculators is facilitated.