Derivatives is used to mitigate the risk of economic losses arising from changes in the value of the underlyings. Following the recent death of Libor (benchmark that reflects the cost of borrowing among banks), big investment banks were fined billions of dollars for trying to rig it. Hence, hedging is necessary, done by taking a position in the futures market that is opposite to the one in the physical market with the objective of reducing or limiting risks. Speculation normally involves making a profit from a security’s price change, whereas hedging attempts to reduce the amount of risk, or volatility, associated with a security’s price change. Hedging risky transactions can help you avoid heavy losses in financial markets. Therefore, derivative instruments are very valuable serving as hedging tools in securities trading as well as in implementing risk-management strategies.
The programme will provide insights into derivatives market categories, including interest rates, commodities, and currencies as well as the recent issues, potentials and its challenges.