Question

What is the primary purpose of using derivatives in financial risk management?

a.

To increase exposure to financial risks

b.

To stabilize the balance sheet position

c.

To speculate on future financial risks

d.

To diversify investment portfolios

Answer: (b).To stabilize the balance sheet position Explanation:Derivatives are used as hybrid financial instruments to treat and manage financial risks, aiming to stabilize a firm's balance sheet position.

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Q. What is the primary purpose of using derivatives in financial risk management?

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