Firms typically buy put options to hedge against:

Question

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Put options are used by firms to hedge against the risk of a decline in the value of their receivables. Receivables represent the money that a firm is owed by its customers, and a decline in the value of these receivables can result in significant losses for the firm. By purchasing put options, the firm can protect itself against this risk, as the put option will allow the firm to sell the receivables at a predetermined price, even if their value declines in the market. Put options are not typically used to hedge against payables, inventory or recessions.

Firms Typically Buy Put Options to Hedge Against