By taking a position in a derivative security that offsets the firm's risk profile,the firm can limit how much its value is affected by changes in the risk factors.

Name: By taking a position in a derivative security that offsets the firm's risk profile,the firm can limit how much its value is affected by changes in the risk factors.
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Question

Quizplus · Accepted Answer

By using derivatives to hedge, a firm can reduce its exposure to certain risks, thereby stabilizing its value against fluctuations in those risk factors.

By Taking a Position in a Derivative Security That Offsets