Corporate risk management through financial derivatives: a review of literature

This literature review focuses on the financial derivatives¹ and its use in corporate risk management and hedging risks from different dimensions in corporate scenario. Literatures are analysed from the last three decades to uncover various aspects of financial derivatives like: the type ofrisks frequently managed through financial derivatives, most commonly used financial derivatives instruments in hedging, concerns of corporates not to go for financial derivatives, industries actively participating in derivative market are few to mention. The literature shows that a number of research work have been done in western economies like U.S, U.K, Germany, Australia, New Zealand, Sweden and others, but a very few work has been done in Indian context. Therefore an attempt has been made in form of a research work by the author to discover the hedging pattern of Indian Inc by using financial derivatives as a risk management tool along with other aspects like: motivation to use financial derivatives, reason behind not to go for financial derivatives, difference in hedging pattern between public (Govt.) and private companies etc. This literature review is part of the above said research work.