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    . They can be used in many ways.

    2) Risk Reduction: Derivatives can protect your business from huge losses. In fact, derivatives allow you to cut down on non-essential risks.

    3) Stable Economy:

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    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 popular notion that derivatives caused the downfall of companies like Enron, is however, not true. The derivatives by themselves are not damaging, their misuse can cause trouble for businesses.

    What are Derivatives? Derivatives are financial arrangements by which your company earns profits based on the functioning of an underlying asset.

    If used properly, derivatives can shore up your company’s defense against many economic problems.

    Advantages of Derivatives: 1) Flexibility: Derivatives can be used with respect to commodity price, interest and exchange rates and equity price. They can be used in many ways.

    2) Risk Reduction: Derivatives can protect your business from huge losses. In fact, derivatives allow you to cut down on non-essential risks.

    3) Stable Economy:

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    line of fire. The popular notion that derivatives caused the downfall of companies like Enron, is however, not true. The derivatives by themselves are not damaging, their misuse can cause trouble for businesses.

    What are Derivatives? Derivatives are financial arrangements by which your company earns profits based on the functioning of an underlying asset.

    If used properly, derivatives can shore up your company’s defense against many economic problems.

    Advantages of Derivatives: 1) Flexibility: Derivatives can be used with respect to commodity price, interest and exchange rates and equity price. They can be used in many ways.

    2) Risk Reduction: Derivatives can protect your business from huge losses. In fact, derivatives allow you to cut down on non-essential risks.

    3) Stable Economy:

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    ses.

    What are Derivatives? Derivatives are financial arrangements by which your company earns profits based on the functioning of an underlying asset.

    If used properly, derivatives can shore up your company’s defense against many economic problems.

    Advantages of Derivatives: 1) Flexibility: Derivatives can be used with respect to commodity price, interest and exchange rates and equity price. They can be used in many ways.

    2) Risk Reduction: Derivatives can protect your business from huge losses. In fact, derivatives allow you to cut down on non-essential risks.

    3) Stable Economy:

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    your company’s defense against many economic problems.

    Advantages of Derivatives: 1) Flexibility: Derivatives can be used with respect to commodity price, interest and exchange rates and equity price. They can be used in many ways.

    2) Risk Reduction: Derivatives can protect your business from huge losses. In fact, derivatives allow you to cut down on non-essential risks.

    3) Stable Economy:

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    . They can be used in many ways.

    2) Risk Reduction: Derivatives can protect your business from huge losses. In fact, derivatives allow you to cut down on non-essential risks.

    3) Stable Economy: Derivatives have a stabilizing effect on the economy by reducing the number of businesses that go under due to volatile market forces.

    Disadvantages of Derivatives:

    If derivatives are misused, they can boomerang on the company.

    1) Credit Risk: While derivatives cut down on the risks caused by a fluctuating market, they increase credit risk. Even after minimizing the credit risk through collateral, you still face some risk from credit protection agencies.

    2) Crimes: Derivatives have a high potential for misuse. They have been the caused the downfall of many companies that used trade malpractices and fraud.

    3) Interest Rates: Wrong forecasts can result in losses amounting to millions of dollars for large companies; it can wipe out small businesses. You need to accurately forecast the

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