Financial Times Handbook of Corporate Finance, 2nd Edition

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OPTIONS

IntroductionWhat is a derivative?A long historyWhat is an option?Share optionsIndex optionsCorporate uses of optionsReal optionsConclusionWebsitesNotes

Introduction

Derivatives – options, futures, forwards, etc. – are the subject of this and the next two chapters. Derivative instruments have become increasingly important for companies over the past 30 years. Managers can exploit these powerful tools to either reduce risk or to go in search of high returns. Naturally, exceptionally high returns come with exceptionally high risk. So managers using derivatives for this purpose need to understand the risk they are exposing their company to. Many companies have lost fortunes by allowing managers to be mesmerised by the potential for ...