A hedge is generally a transaction that mitigates risk, while speculation is the taking on of risk with a view to earning a profit. If the contract is a hedge, any cash settlement payments required to be paid under the forward contract would be characterized as capital losses; if the contract is speculative, the losses would be treated as income losses. Under the appellant's agreement with TD Securities in 1997, when he launched his own business, if the value of the shares he had pledged as security against his loan increased by the future date set in the forward contract, MacDonald would pay TD the full amount of the increase. If the value of the shares went down, TD Securities would pay him, and the money MacDonald received would be used as extra security for the loan for his business provided by the TD Bank. The price of the shares increased, and MacDonald made cash settlement payments to TD Bank of more than $10 million under the forward contract.