Derivatives and Risk Management in Commodities: Swaps and Options, the Most Effective Instruments to Hedge against Oil Price Fluctuations

Over – the – counter derivatives trading for oil accelerated in the 1980s as a result of a more pressing requirement to adequately manage risks associated with oil price fluctuations which were having an impact on nearly all business activity. . This dissertation presents an examination of the oil market and discusses why options and swaps are more effective in the management of price risks related to the oil market.