Derivative securities are a result of financial innovation and their value is dependent upon the value of an underlying security. They are also called contingent claims since their value is contingent upon the value of another security. The most important use of derivatives is risk-reduction, called hedging. Derivatives "hedging," is based on the idea that the change in the value of a derivatives position can offset the change in the value of the underlying asset . …
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showed last 75 words of 3767 total
…No. 4. (Sep., 1997), pp. 1323-1354. Stable URL: http://links.jstor.org/sici?sici=0022-1082%28199709%2952%3A4%3C1323%3AWFUCD%3E2.0.CO%3B2-I On the Determinants of Corporate Hedging (in Shorter Papers) Deana R. Nance; Clifford W. Smith, Jr.; Charles W. Smithson The Journal of Finance, Vol. 48, No. 1. (Mar., 1993), pp. 267-284. Stable URL: http://links.jstor.org/sici?sici=0022-1082%28199303%2948%3A1%3C267%3AOTDOCH%3E2.0.CO%3B2-0 Mark Brinblatt, Financial Markets and Corporate Strategy (New York; McGraw Hill, 2002)