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Chapter 13: Financial Derivatives
Synopsis
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Beginning in the 1970s and continuing into the 1980s and 1990s, interest rates and foreign exchange rates became more volatile, increasing the risk to financial institutions. To combat this, managers of financial institutions have demanded financial instruments to better manage risk. These instruments, called financial derivatives, have become an important source of profits for financial institutions, particularly larger banks. In this chapter, we investigate the use of forward contracts, financial futures, options, and swaps to reduce risk.
For a more detailed chapter review with additional exercises and self-tests, order the Student Study Guide, ISBN 0-321-19416-0.
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