Use of derivatives ■ Risk management Derivatives can be used to reduce risks Hedging Insurance(auto insurance) a speculation Derivatives can serve as investment vehicles Making bets highly leveraged Charles caoCharles Cao 8 Use of Derivatives ◼ Risk management ◼ Derivatives can be used to reduce risks ◼ Hedging ◼ Insurance (auto insurance) ◼ Speculation ◼ Derivatives can serve as investment vehicles ◼ Making bets highly leveraged