Question

How are derivatives commonly used for risk management?

a.

To speculate and make a financial bet.

b.

As a form of insurance against undesired events.

c.

To amplify potential losses.

d.

To increase profit through speculation.

Posted under IC 89 Management Accounting

Answer: (b).As a form of insurance against undesired events. Explanation:Derivatives are commonly used for risk management by acting as a form of "insurance" against undesired events, providing offsetting compensation.

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Q. How are derivatives commonly used for risk management?
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