Details

• report should not be more than 4 pages.( Font: Times new Roman 12 pts)

Derivatives are financial instruments used to hedge risks. One of the important risks where derivatives are commonly used is the foreign exchange risk which helps stabilize any cash flows generated overseas.

Some financial managers misuse derivatives and speculate on international financial markets. In doing so these instruments prove to be very risky and usually lead to dramatic losses.

The structure of the assignment is:

• Introduction (give an introduction about what is derivative in general and why companies use it)
• body

1. Explain how derivatives can be used to hedge foreign exchange risk?
2. Make a search and give an example where the use of derivatives resulted in big losses? (give one major example)
3. What do you think should be done to mitigate the risks associated with derivatives?

• Conclusion
• References