Benefits to use derivatives Permit firms to achieve payoffs that they would not be able to achieve without derivatives,or could achieve only at greater cost 图 Hedge risks that otherwise would not be possible to hedge 图 Make underlying markets more efficient Reduce volatility of stock returns 图 Minimize earnings volatility Reduce tax liabilities Motivate management (agency theory effect)Benefits to use derivatives Permit firms to achieve payoffs that they would not be able to achieve without derivatives, or could achieve only at greater cost Hedge risks that otherwise would not be possible to hedge Make underlying markets more efficient Reduce volatility of stock returns Minimize earnings volatility Reduce tax liabilities Motivate management (agency theory effect)