Derivative contracts can be used to both increase and decrease exposure to risk.

Question

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Derivative contracts can be used in a variety of ways to manage risk, including increasing or decreasing exposure to certain risks. For example, an investor might use a futures contract to increase exposure to a certain commodity in the hopes of profiting from a price increase, or they could use options to decrease exposure to a particular stock in case of a market downturn.

Derivative Contracts Can Be Used to Both Increase and Decrease