Several financial instruments are commonly used in hedging:
Futures Contracts: Agreements to buy or sell a particular asset at a predetermined price at a specified future date. Options: Contracts that give the buyer the right, but not the obligation, to buy or sell an asset at a set price before a certain date. Swaps: Agreements between two parties to exchange cash flows or other financial instruments over a set period. Forward Contracts: Customized contracts between two parties to buy or sell an asset at a specified price on a future date.