Economics Derivatives Questions
The role of derivatives in pension funds is to manage and mitigate various risks associated with the fund's investments. Derivatives allow pension funds to hedge against potential losses, protect against market volatility, and enhance portfolio diversification. They provide pension funds with the ability to manage interest rate, currency, and credit risks, as well as to gain exposure to specific asset classes or investment strategies. Additionally, derivatives can be used to enhance returns and generate additional income for the pension fund.