Derivatives are financial instruments that:
A) present high levels of risk and should only be used by the wealthy.
B) when used correctly can actually lower risk.
C) should only be used by people seeking high returns from low risk.
D) represent the outright purchase of a bond.

Question

Quizplus · Accepted Answer

Derivatives can be used as a risk management tool to hedge against potential losses. When used correctly, they can actually lower risk. However, misuse of derivatives can lead to significant financial losses.

Derivatives Are Financial Instruments That