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Essay / Research Paper Abstract
There are many risks faced by business, this 6 page paper looks at how and why businesses use futures and options at a microeconomic level. The bibliography cites 5 sources.
Page Count:
6 pages (~225 words per page)
File: TS14_TEfutrisk.rtf
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Unformatted sample text from the term paper:
firm is usually to maximise profit within the acceptable moral, legal and ethical framework that the company operates within. In international trade there may also be aspects of competitive advantage
as well as competitive advantage in the way a firm decides how to compete. However, even if there is the use of a comparative advantage as described by Adam Smith,
or even Richardos idea if when least level of comparative disadvantage, there is also the likelihood that other inputs will be required. Where there are international trades required for these
inputs there may be different types of risk, the risk of the currency exchange rates fluctuating and the price of the commodity itself fluctuating. One tool that is used to
reduce exposure to risk has been that of future bought on the future market. To consider how these are used we need to look at the way they are used
as a risk modifier and how they may be used with options as a hedge. Hedging is a term of used, even
in colloquial language phases such as hedging ones bets, or ones position maybe heard, which is generally interpreted to mean the protection of a positions so that the risk for
the future is minimised or controlled. When we consider hedging in corporate terms with financial tools this is still the correct basis for the interpretation of the term.
This is a tool that is made use of by traders or companies that want to protect an open position. An open position is a
position where losses may be incurred as the company or trader has some commodities, which can include currency and securities, which are bought, but not sold, or sales that are
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