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What is the importance of derivatives in the business field?
The importance of derivative is that it helps in transfering risk. Making more clear it can't eliminate risk but can transfer. 1) Efficient Allocaation of Risk 2) Lower Cost of Hedging 3)Liquidity 4) Risk Management These are the main features of the Derivatives which help in transfering risk.
Why should bilges be kept clean and free oil drips?
to reduce the risk of pollution
What are the control designed to do?
Controls are designed to reduce or eliminate risk.
How do mutual funds reduce the risk of loss?
Mutual fund do not reduce the risk of loss.
Can exercise reduce the risk of dying young?
Yes, it can reduce the risk of dying young.
What has the author Rajiv Srivastava written?
Rajiv Srivastava has written: 'DERIVATIVES AND RISK MANAGEMENT' -- subject(s): Risk management, Derivative securities
What are controls designated to do?
Controls are designed to reduce or eliminate risk.
What is the use of derivatives in business?
Derivatives as the name suggests derive its value from an underlying asset. The main purpose of derivatives is to hedge the risk. Hedging means it helps to reduce the risk but it does not necessarily eliminate the risk. However it needs special precaution to take when one is going to use the derivatives otherwise it will be like a double edged sword. Business like banks and corporate use derivatives to hedge the fluctuations in the market, be it the interest rate or the currency. Fluctuations in interest rates are the ones where banks are interested to use interest rate future(used as derivatives),plain vanilla interest rate swap etc. A company like CocaCola might be interested to hedge its risk of not getting profit if the season for its coke does not pick up due to bad weather ahead. One can not predict the weather so in this case derivatives like weather derivatives are used to hedge the risk. However as a market participant one can use the derivatives for the purpose of trading also. Trading on options or futures where shares or indexes can be an underlying asset. Traders also try to guard against the falling stock market. There are different inputs required for them which are mostly mathematical and statistical. Those instruments has to be priced using some methods which are always complex. Different complex strategies like stradle and strangle etc are used in case options. It is a kind of insurance against the probable losses in future. But one has to do it cautiously otherwise there will be the opposite impact.
What can you do to reduce your risk factors?
To reduce your risk factors, which can help you reduce your chances of getting cancer, you should have a healthy diet and stay away from tobacco.
What has the author Watson Ed written?
Watson Ed. has written: 'Pricing credit derivatives and credit risk'
What practice reduce reduces the risk of a boating emergency?
Education and training help reduce the risk of a boating emergency.
Does upper body exercises reduce risk of Alzheimer's?
Upper body exercises don't reduce risk of Alzheimer's.
