Risk Management - Options, Futures & Forward Contracts
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Analyze the risk management role of options, futures and forward contracts.
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Risk Management Role of Options
Options are the instruments, which provide right to take an action without the obligation to take that action. It is effective to manage the risk as by using this tool, managers can shift the risks. It plays a role of strategic thinker, which is helpful to improve the project planning and strategic thinking, which is a valid risk mitigation aspect for the firms. Options plays an important role tom reduce the risk level and to increase values from a contract (Damodaran, 2008). Options give right to terminate a contract at any time, in which an investors see the risk at less cost, which is effective to reduce the overall risk for the ...
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