alt Hacker NewsI won't. What's the difference here between resisting and absorbing volatility?
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Volatility is a natural consequence of weather, blight, etc., etc.
To reduce volatility you would need to actually stabilize the supply of onions.
What futures do is allow traders to shift risk from the future to the present. By pricing that risk, it's possible for people who depend on onions to pay a little more now in exchange for a guarantee about the future.
It's not magically going to make onions less volatile (although high risk prices can spur investment which might) but it can reduce disruptions caused by volatility.
The classic example of this is futures on jet fuel which allow airlines to weather random wars in the middle east, OPEC shenanigans, etc. Ticket prices are higher this way, but the existential threat of being forced to cancel a bunch of flights is gone.
Not a financial expert, but i think reduce implies it goes away, and absorb implies it’s still there but someone is taking it up.
Like reducing the amount of water on the floor would be turning off the tap. Absorbing the amount of water on the floor is when you mop it up.