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Options Hedging As A Mean Of Price Risk Elimination

Author

Listed:
  • Tonci Lazibat

    (University of Zagreb)

  • Tomislav Bakovic

    (University of Zagreb)

Abstract

Price risk can be considered one of most important risks most foreign trade companies face. From this aspect use of modern futures markets can be considered a basic precondition for the survival of most businesses. For the purpose of insurance hedging has been in use for more than a century, but still its forms have evolved over time. On the other hand options can be considered the most sophisticated instrument futures trade can offer at this point. The aim of this paper is to present how options, which are normally considered a main tool for speculation, can successfully be used as a tool for price risk elimination.

Suggested Citation

  • Tonci Lazibat & Tomislav Bakovic, 2007. "Options Hedging As A Mean Of Price Risk Elimination," Economic Thought and Practice, Department of Economics and Business, University of Dubrovnik, vol. 16(1), pages 63-78, june.
    • Handle: RePEc:avo:emipdu:v:16:y:2007:i:1:p:63-78
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    More about this item

    Keywords

    hedging; price risk; options; futures markets;
    All these keywords.

    JEL classification:

    • F19 - International Economics - - Trade - - - Other
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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