This lesson examines the use of financial derivatives for hedging purposes, covering forwards, futures, swaps, and options. It also addresses the concept of insurability and the role of insurance in risk transfer .

• Derivatives Fundamentals: The course covers the basics of derivative securities. The goal is to understand how the most important derivative contracts—specifically forwards, futures, swaps, and options—work, how they are used for hedging and speculation by investors as diverse as corporates, asset managers, and institutions, and how the pricing of these contracts works . Concepts and instruments such as derivatives, hedging, and insurance are discussed .

• Hedging Strategies: The course considers how firms should hedge risk from a broad strategic perspective, focusing particularly on currency risk and, more specifically, transaction, translation, and economic exposure. It examines when it makes sense to hedge financially and what types of contracts to consider . The different ways of hedging exposure embedded in bonds are also discussed .

• Insurability and Insurance: Students learn to assess the insurability of certain risks and evaluate different risk management techniques in terms of pricing, relevance, and usage . The role of insurance in transferring risk is examined alongside the use of derivatives for hedging.

• Strategic Hedging Policy: The course deals with strategic issues of hedging policy, including discussions of the hedging impact of non-tradable risks and linkages between different types of risk . The goal is to understand the international dimension of risk and develop a framework to quantify it .