How and why do companies hedge?

Should companies use derivatives to hedge? How and why do companies hedge?

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Should Companies Use Derivatives to Hedge?

Over the last several decades, the use of derivatives as a tool to mitigate and control risk has expanded significantly. Despite well-publicized abuses involving derivatives, the efficacy of derivatives as a means of managing economic and other forms of risk remains widely accepted. The evolving mix of users of derivatives in the last ten years has also impacted the derivatives landscape. Traditionally, commercial hedgers such as processors, mills and large corporations used derivatives to manage risks; today, while commercial hedgers remain active, much of the increase in volume in derivatives is attributable to non-traditional end-users, such as public companies, which have been active users of derivatives, most notably interest rate and foreign currency hedging instruments.

Видео How and why do companies hedge? канала Patrick Boyle