Derivative Instruments for Hedging

Derivative instruments for hedging are financial tools that help businesses or investors reduce the risk of price fluctuations in assets or commodities. They derive their value from an underlying asset, like currencies, stocks, or commodities. By using derivatives such as futures, options, or swaps, organizations can lock in prices or set conditions to offset potential losses caused by market volatility. This strategy provides financial stability, allowing entities to better plan and manage uncertainty, ultimately protecting against unfavorable price swings without having to buy or sell the actual asset immediately.