Utilizing Derivatives for Risk Management in Portfolios

As part of the wealth management team at a financial advisory firm, you have been tasked with assessing the risk exposure of a client's investment portfolio. The client has expressed concerns regarding potential market volatility and is interested in using derivatives to hedge against these risks.

Describe how derivatives can be utilized in risk management to help the client mitigate potential losses due to market fluctuations. Be sure to discuss specific types of derivatives, the advantages and disadvantages of using these instruments, and how they fit within a broader risk management strategy.