When an organization purchases a derivative contract in the stock market to limit the potential loss in the value of a security, the organization is applying which of the following risk management techniques?
When an organization purchases a derivative contract in the stock market to limit the potential loss in the value of a security, it is transferring the risk to another party. In this case, the derivative contract (such as options or futures) serves as a hedge against potential losses, meaning the risk of loss is transferred to the counterparty of the derivative contract. References:
Institute of Internal Auditors (IIA) standards and guidelines on risk management and control.
Contribute your Thoughts:
Chosen Answer:
This is a voting comment (?). You can switch to a simple comment. It is better to Upvote an existing comment if you don't have anything to add.
Submit