Posted: September 13th, 2017

Derivatives and Risk Management

Paper, Order, or Assignment Requirements

Plan
1. Introduction
As the developing of financial area, the importance and the proportion of derivatives are increasing. New derivatives are created by financial firms constantly.
2. What is derivative?

3. What is hedging?

4. Firms and derivatives
Risks can be managed by hedging (using derivatives).
How does a firm manage the risks with derivatives?
A further M-M proposition of hedging: the value of a firm is independent of whether or not it hedges.
Examples: P&G Coca-Cola…
5. The benefits and risks to firms of hedging with derivatives
Benefits 
Risks 
6. Conclusion and individual opinion

Feedback from tutor of this plan: I would begin with a discussion of why Warren Buffett is critical of derivatives. Make sure that you integrate your use of caes with your discussion of risks and benefits. I would have liked to have seen which cases you will sue to illustrate benefits and which to illustrate risks at this stage.