Proceedings of the 2022 2nd International Conference on Economic Development and Business Culture (ICEDBC 2022)

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Financial Derivatives: Application and Risk Management

Authors
Feiran Xiang1, *
1DeGroote School of Business, McMaster University, Hamilton, L8S 4E8, Canada
*Corresponding author. Email: xiangf1@mcmaster.ca
Corresponding Author
Feiran Xiang
Available Online 31 December 2022.
DOI
10.2991/978-94-6463-036-7_131How to use a DOI?
Keywords
Financial derivatives; Application; Risk management; Hedging; High leverage
ABSTRACT

While financial derivatives are a necessary hedge in today's financial markets, they also carry substantial risks. There has been a steady stream of cases of significant losses incurred by companies investing in derivative financial instruments around the world. The highly leveraged nature of derivatives has created a crisis in the financial system. This paper uses a combination of theoretical analysis and case analysis, starting with introducing the origins of derivatives, the principles of trading and the explicit and potential risks that may be encountered. Then, two specific corporate case studies are presented to demonstrate the improper usage of financial derivatives and the crisis that might result from an ineffective risk management strategy. Finally, recommendations for risk management and derivatives regulation systems are presented. It is hoped that the research in this paper will lead to a better understanding of the importance of strengthening regulation and risk-aversion awareness in the financial derivatives market. In addition, provide existing companies with a new approach to derivatives risk management to help the financial derivatives market achieve steady growth.

Copyright
© 2022 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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Volume Title
Proceedings of the 2022 2nd International Conference on Economic Development and Business Culture (ICEDBC 2022)
Series
Advances in Economics, Business and Management Research
Publication Date
31 December 2022
ISBN
10.2991/978-94-6463-036-7_131
ISSN
2352-5428
DOI
10.2991/978-94-6463-036-7_131How to use a DOI?
Copyright
© 2022 The Author(s)
Open Access
Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

Cite this article

risenwbib
TY  - CONF
AU  - Feiran Xiang
PY  - 2022
DA  - 2022/12/31
TI  - Financial Derivatives: Application and Risk Management
BT  - Proceedings of the 2022 2nd International Conference on Economic Development and Business Culture (ICEDBC 2022)
PB  - Atlantis Press
SP  - 890
EP  - 895
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6463-036-7_131
DO  - 10.2991/978-94-6463-036-7_131
ID  - Xiang2022
ER  -