Managing trading risk
A London International Financial Futures and Options Exchange case study

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Page 6: Conclusion

London International Financial Futures And Options 4 Image 5This example can be used to illustrate the importance of the commodity futures market. Most business organisations cannot afford to be risk loving and therefore opt for risk aversion.

The futures market enables these businesses to work in an ordered and disciplined market place in which the risk of rapidly changing commodity prices is greatly reduced. It reduces the risk of uncertainty from uncontrollable events, such as a bad coffee harvest, enabling traders to buy and sell commodities in the future, at prices specified today.

London International Financial Futures and Options Exchange | Managing trading risk
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