What is a derivative? Derivatives can be thought of as bets But the bet hedges you both against unfavorable outcomes The contracts has reduced risk for both of you Investors can use derivatives to speculate on the price of corn Key point: how it is used Charles caoCharles Cao 7 What is a Derivative? ◼ Derivatives can be thought of as bets ◼ But the bet hedges you both against unfavorable outcomes ◼ The contracts has reduced risk for both of you ◼ Investors can use derivatives to speculate on the price of corn ◼ Key point: how it is used