After completing this chapter, you will be able to answer the following questions:
What are derivatives and what are the main uses of derivatives?
What are forwards, futures, options, and swaps?
What are risks and how do they affect businesses?
What are commodity price risks, interest rate risks, and currency risks?
Why is it important to manage risks?
What is meant by hedging?
What are the approaches to risk management?
While dealing with derivatives, a number of points are to be kept in mind. First, a derivative contract is based on a zero-sum game, which means that for every person who makes money from derivatives, there must be one loser. Second, many derivative ...