Economics Derivatives Questions
The role of derivatives in investment banking is to provide financial instruments that allow investors to manage and hedge risks, speculate on price movements, and enhance investment returns. Derivatives enable investors to gain exposure to underlying assets such as stocks, bonds, commodities, or currencies without directly owning them. They offer flexibility, liquidity, and the ability to customize investment strategies. Investment banks facilitate the trading and structuring of derivatives, acting as intermediaries between buyers and sellers, and also use derivatives for their own risk management and trading purposes.