The most common reason that corporate firms use the futures and options markets is:
A) to hedge risk.
B) to take risk.
C) to make deposits.
D) none of the above.

Question

Quizplus · Accepted Answer

The most common reason that corporate firms use futures and options markets is to hedge risk. This allows companies to lock in prices for commodities, currencies, or other financial instruments, reducing the potential impact of market fluctuations on their business. By hedging their risks, firms can also gain more confidence in their strategic planning and decision-making processes. Using futures and options markets to take risks, on the other hand, may be a less common practice for corporations, as it involves higher levels of volatility and uncertainty. Deposits are typically made in other types of financial markets, such as the money or bond markets.

The Most Common Reason That Corporate Firms Use the Futures