What are business firms most likely to use derivative securities for?
A) Hedging
B) Speculating
C) Doing calculus problems
D) Market making

Question

Quizplus · Accepted Answer

Business firms are most likely to use derivative securities for hedging. Derivatives provide a way for companies to reduce their exposure to various market risks, such as interest rate risk, currency risk, or commodity price risk. By using derivative securities, companies can lock in a specific price or rate for a particular asset or liability, protecting themselves from potential losses. While some firms may use derivatives for speculative purposes, hedging is the primary motivation for most businesses to use these securities. Doing calculus problems and market making are not common uses for derivative securities in the business world.

What Are Business Firms Most Likely to Use Derivative Securities