The Use of Financial Derivatives by Financial Institutions to Hedge

Multiple Choice

The use of financial derivatives by financial institutions to hedge can decrease risk.However,they can also increase risk.Which of the following examples illustrates this?

A) Financial derivatives allow financial institutions to increase their leverage.
B) Some institutions such huge amounts of derivatives that the amounts exceed capital.
C) All of the above are valid examples.
D) None of the above are valid examples.