Financial derivatives

Godfred Amewu, Michael E. Asamoah, Boison A. Angmosi and Akuoko K. Angelo

Chapter 13 in The Elgar Companion to Financial Economics, 2025, pp 237-258 from Edward Elgar Publishing

Abstract: Derivatives are unique kinds of financial instruments whose value is derived from the value of underlying assets, such as stocks, currencies, or commodities. They take various forms and can be traded by individual investors, corporate entities, and some government agencies. Derivatives are essential in risk management, as they enable investors to protect against potential losses in the value of the underlying asset. The most common risks that can be hedged using financial derivatives include commodity price fluctuations, currency risk, interest rate risks, and the like. In spite of the effectiveness of using derivatives as a risk management strategy, the concept, in its form and shape, is complex. It is, therefore, very important to provide some insight into how these financial instruments work. This chapter provides a review of various derivative instruments, how they work, and current issues in these instruments within the financial ecosystem.

Keywords: Financial derivatives; Forwards; Futures; Options; Swaps; Risk management (search for similar items in EconPapers)
Date: 2025
ISBN: 9781035341399
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