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4. Uses of Derivatives to Manage Exposure Managing Risk with Derivatives Options and Corporate Finance > Managing Risk with Derivatives Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance?campaign_content=book_192_section_121&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=di rect&utm_source=boundless

5. Companies that produce or depend on the purchase of commodities are exposed to price fluctuations that occur in commodities markets. Hedging also occurs when an individual or institution buys an asset (such as a commodity, a bond that has coupon payments, a stock that pays dividends, etc. ) and sells it using a futures contract. Although a third party, called a "clearing house," insures a futures contract; not all derivatives are insured against counter-party risk. Uses of Derivatives to Manage Exposure Free to share, print, make copies and changes. Get yours at www.boundless.com www.boundless.com/finance/textbooks/boundless-finance-textbook/options-and-corporate-finance-16/managing-risk-with-derivatives-121/uses-of- derivatives-to-manage-exposure-499- 906?campaign_content=book_192_section_121&campaign_term=Finance&utm_campaign=powerpoint&utm_medium=direct&utm_source=boundl ess Commodity Price Fluctuation View on Boundless.com Options and Corporate Finance > Managing Risk with Derivatives

6. Free to share, print, make copies and changes. Get yours at www.boundless.com Appendix

7. Key terms commodities term used to describe a class of goods for which there is demand, but which is supplied without qualitative differentiation across a market. Free to share, print, make copies and changes. Get yours at www.boundless.com Options and Corporate Finance

8. Commodity Price Fluctuation This graph shows the price of crude oil between August 2008 and January 2009. Companies depending on the price of oil for their supply can implement hedging strategies using derivatives to manage this exposure. Free to share, print, make copies and changes. Get yours at www.boundless.com Flickr. "All sizes | Brent crude oil price | Flickr - Photo Sharing!." CC BY-SA http://www.flickr.com/photos/traftery/3235920577/sizes/o/in/photostream/ View on Boundless.comCC BY-SAhttp://www.flickr.com/photos/traftery/3235920577/sizes/o/in/photostream/View on Boundless.com Options and Corporate Finance

9. Free to share, print, make copies and changes. Get yours at www.boundless.com Options and Corporate Finance Derivatives are used to minimize what type of risk? A) Counter-party risk. B) Commodity risk. C) Price risk. D) All of these answers.

10. Free to share, print, make copies and changes. Get yours at www.boundless.comwww.boundless.com Boundless - LO. "Boundless." CC BY-SA 3.0 http://www.boundless.com/CC BY-SA 3.0http://www.boundless.com/ Options and Corporate Finance Derivatives are used to minimize what type of risk? A) Counter-party risk. B) Commodity risk. C) Price risk. D) All of these answers.

11. Attribution Wikipedia. "commodities." CC BY-SA 3.0 http://en.wikipedia.org/wiki/commoditiesCC BY-SA 3.0http://en.wikipedia.org/wiki/commodities Wikipedia. "Derivative (finance)." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Derivative_(finance)CC BY-SA 3.0http://en.wikipedia.org/wiki/Derivative_(finance) Wikipedia. "Commodity price index." CC BY-SA 3.0 http://en.wikipedia.org/wiki/Commodity_price_indexCC BY-SA 3.0http://en.wikipedia.org/wiki/Commodity_price_index Free to share, print, make copies and changes. Get yours at www.boundless.com Options and Corporate Finance