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Week 8 Short Answer Assignment

Week 8 Short Answer Assignment

Q Instructions Please, review the question below, and write a 2-3 paragraph essay, answering the question in your own words. Use any outside sources you consider relevant. How can the use of derivatives help a corporation minimize risk?

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A derivative is a financial instrument whose features and value are derived from the price or value of a more fundamental financial asset. Bonds, stock, a currency, or a commodity are examples of underlying assets. A contract between two parties is required for derivatives. Between the two parties, money is exchanged. Options, Forward Contracts, Futures Contracts, and Swaps are examples of derivatives (Liu, 2021).