Some form of risk taking is inherent to any business activity (if there were no risk, it is likely there would be no reward). Some forms of risk are "natural" to a business, whose competitive advantage is to manage the risk well, i.e. to minimise the costs of the risk, against the profit it is likely to achieve. Other forms of risk are not wanted, but cannot, as things stand, be avoided. For example someone who has a shop, takes care of the risk of competition, of poor or unpopular products, and so on, as "natural" risks. The risk of their stock being destroyed by fire is unwanted, however. Hedging consists in selling off the unwanted risk to those (such as those who have computed the actuarial value of fire risk) who have the ability or desire to take it.
For the following categories of risk, there now exist well-developed markets in which the risk is commoditised or securitised, or put into some OTC contract to be transferred between buyers and sellers.
Common forms of market risk are
Hedging Insurance risk
One of the oldest means of hedging against risk is the purchase protection against accidental loss or damage to property, or injury, loss of life. See Insurance.
Hedging Credit risk
Credit risk is the risk that money owing will not be paid by an obligor. Since credit risk is the natural business of banks, but an unwanted risk for commercial traders, naturally an early market developed between banks and traders, that invovled selling an obligations on at a discounted rate. See for example