METHODS AND TECHNIQUES FOR HEDGING FINANCIAL RISKS USING DERIVATIVE INSTRUMENTS

Nicula Fulga Elena Carmen
Additional contact information
Nicula Fulga Elena Carmen: UNIVERSITY OF CRAIOVA EUGENIU CARADA DOCTORAL SCHOOL OF ECONOMIC SCIENCES

Annals - Economy Series, 2026, vol. 1, 372-379

Abstract: Derivative financial instruments represent a core component of modern financial risk management, providing flexible mechanisms for hedging exposures generated by market volatility and macroeconomic uncertainty. The aim of this paper is to systematize the main categories of financial risk that can be hedged through derivative instruments and to analyze the methods and techniques of hedging employed in practice, from an integrated perspective that combines theoretical foundations with recent developments in financial practice and regulation. The analysis addresses market risk, interest rate risk, foreign exchange risk, credit risk, and commodity price risk, highlighting the corresponding derivative instruments—futures, options, swaps, and credit derivatives—as well as the associated hedging strategies. The paper emphasizes the transition from static hedging approaches to dynamic risk management frameworks, based on sensitivity indicators, portfolio rebalancing, and the use of more robust risk measures, such as Expected Shortfall. In addition, the institutional and regulatory dimensions are examined, including central clearing, collateral requirements, and post-crisis regulatory reforms, and their impact on the effectiveness and costs of hedging strategies. The contribution of this paper lies in articulating a coherent perspective on the use of derivative financial instruments in risk management, highlighting the conditions under which they can support financial stability, risk-adjusted performance, and informed decision-making by economic entities in a complex and volatile financial environment.

Keywords: derivative financial instruments; risk management; hedging; market risk; interest rate risk; foreign exchange risk; credit risk (search for similar items in EconPapers)
Date: 2026
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.utgjiu.ro/revista/ec/pdf/2026-01/40_Nicula.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cbu:jrnlec:y:2026:v:1:p:372-379

Access Statistics for this article

More articles in Annals - Economy Series from Constantin Brancusi University, Faculty of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Ecobici Nicolae ().