Everything You’ve Ever Wanted to Know About Derivatives
The capital markets and broader economy hum when a number of components work together in harmony. Risk and reward are some of the most basic principles that underlie every transaction that takes place in the capital markets. One mechanism that enables investors to manage their risks is derivatives.
Today, many companies use derivatives to protect themselves against challenges that are part of running a business. Financial institutions also use derivatives to hedge their exposure for things like credit risk so they can lend more money to more borrowers.
Here are a few key facts about what derivatives are, what they do and how they are being used today.