Early in 1994, analysts were largely caught off guard by problems involving
financial derivatives. (The collective term for these instruments reflects
that their valuations derive from the values of other assets, e.g.,
commodities, indexes of securities.) For years, corporations had used derivatives
such as swaps and structured financings to hedge against swings in interest
rates, currency exchange rates, and other cost factors.
Early in 1994, analysts were largely caught off guard by problems involvingfinancial derivatives. (The collective term for these instruments reflectsthat their valuations derive from the values of other assets, e.g.,commodities, indexes of securities.) For years, corporations had used derivativessuch as swaps and structured financings to hedge against swings in interestrates, currency exchange rates, and other cost factors.
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