Derivatives and other structured financial products are generally used for positive, risk-reduction purposes. For example, to secure the price of a commodity which is to be "bought" at a future date, but at a price that is set today. However, some academics and economic commentators view these as dangerous and irresponsible innovations in the world of international banking and global financial services.Traders in these structured financial products are able to make large bets on the change in price of commodities or currencies and only need pay a small up-front deposit. Such traders can accumulate huge exposure to losses which could be devastating to their employers.Sceptics believe that one day such products could lead to financial ruin for a bank if one or more derivatives traders chase their losses over an extended period of time. In summary, complex, structured financial products are a necessary evil to meet the demands of modern-day capitalist societies.The media has portrayed derivatives as bad financial products.TrueFalseCannot Tell

Forwards, futures and options are examples of derivatives that can be used to hedge against foreign currency risk exposure. Group of answer choicesTrueFalse

Which term defines using currency derivatives to reduce potential currency risks due to currency exchange rate movement that could lead to losses for a firm?SpeculationLong positionShort positionHedging

Financial markets perform the basic function​ of: Group of answer choices mitigating the business cycle providing a​ risk-free means of storing wealth assuring that governments need never resort to printing money to finance their expenditure matching savers with funds to lend to people who want to borrow funds

Green Growers is aware of the potential for currency fluctuations to impact its profitability. Which of the following actions would be the LEAST effective in mitigating the risk of currency fluctuations?Group of answer choicesImplementing currency hedging strategies to lock in exchange rates.Focusing on exporting to countries with strong, stable currencies.Negotiating contracts with international customers in US dollars.Diversifying its export markets to reduce dependence on a single currency.

Via a digital structure, buyers and sellers interact to trade money and assets.*1 pointPromotes saving habitsStable and systematic security pricesEconomic growthAvailability of funds