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How To Minimize Risks With Derivatives?

Started by : Varun Sood, Associate, JP MorganChase   09 04 2008 21:17:23 +0000
Industry : Investment BankingFunctional Area : Derivatives(Markets)
Keywords : Risks Derivatives Minimize
Activity:  13 views;  last activity : 07 06 2010 20:18:09 +0000

Derivatives have come under general scrutiny in recent times, owing to the use of hedging instruments by companies for financial mismanagement. The misuse of derivatives has put many companies in the legal line of fire. The derivatives by themselves are not damaging, their misuse can cause trouble for businesses.so let us put our own ideas of using derivatives.
 
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1 2 3
1 Future Exchanges
2 Asset and Liability driven Transactions
3 Derivative Policy
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Future Exchanges

idea posted by Varun Sood Associate, JP MorganChase
Arrange the derivatives through future exchanges. You may need to put in a lot of work here, you must keep track of all adjustments in the market worth of the underlying asset.
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Asset and Liability driven Transactions

idea posted by Satish Pandey Sr. Associate, IL&FS Venture Corporation
The transactions should be driven by asset and liability management. You should not speculate based on future forecasts.
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Derivative Policy

idea posted by Gandhi Rajan Sr. Associate, ICICI Securities
A good derivative policy can help as it focuses more on cost management and less on forecasting. It should aim for cutting down expenses and costs.
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