Businesses use derivatives for various reasons, including:
Risk Management: Derivatives can be used to hedge against risks such as fluctuations in commodity prices, interest rates, and foreign exchange rates. Speculation: Traders may use derivatives to speculate on the future direction of markets, potentially earning profits from price changes. Arbitrage: Derivatives can exploit price differences in different markets to achieve risk-free profits. Access to Otherwise Inaccessible Markets: Derivatives can provide exposure to markets or assets that might be difficult or expensive to access directly.