The financial derivatives myths and doubts : a conclusion

Abstract

This review highlights derivatives as one of the most widespread instruments for risk management among both financial and non-financial firms. Their use continues to increase mainly as a way to hedge or to obtain higher revenues. Similar to other instruments, this increases exposure to risk. However, the huge losses suffered by companies, funds and banks as a consequence of misuse have instigated questions about its usefulness and lots of talk in the media. This spurred an interest for the author, in the factors influencing the manner in which these instrument are used (the reasons why). The aim of the author was to determine whether there are a manifold of rea- sons concerning ‘users’ and ‘controllers’, rather than the derivative instruments themselves, that lead to unprofitable decisions.