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CFA Level 1
Derivatives

Uses of Derivatives: Hedging Risk Exposure

Medium Derivative Markets And Instruments Uses Of Derivatives

In the context of risk management, derivatives are often used by investors to hedge against potential losses in the market. One common use of derivatives involves entering an agreement to lock in prices for a future transaction. This practice can effectively stabilize cash flow and protect investors from unfavorable price movements. Which of the following uses of derivatives is primarily aimed at reducing risk exposure by locking in prices?

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