Futures and risk: the rise and demise of the hedger-speculator dichotomy

In interpreting futures markets, a well-established dichotomy of hedgers and speculators is at play. Hedgers are unwillingly exposed to risks; speculators take them over hoping for profit. This concept ignores the changing notions and practices of speculation and especially hedging since the nineteenth century. Originally, hedging meant that merchants buy time in ongoing transactions. The concept later pointed to securing projected transactions by producers and processors. In todays risk economy, the term can label at best the intent to decrease exposure to a specific market risk, as part of a constant process of readjusting principally speculative market positions by all market participants. Futures markets ultimately increased the average exposure to risk, but they also made the exposure potentially manageable; this entails that the economic process is increasingly developed by expressing expectations about the future through taking market positions, that is, by creating risk.