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Forward and futures contracts can be used as a way to hedge firm committments. However, as soon as you deal with a potential commitment, it might be dangerous the use firm commitments -that's what they involve- for hedging purposes.

As shown, forward and futures contracts are often used by somebody who needs protection against the risk of a price change.

We will now study a situation where an option is perhaps more suitable than a forward contract to hedge a given price risk.