In a 1997 Review article, the authors described the good, the bad, and the ugly features of what they called the new risk management, which is the use of financial derivatives to hedge risk in firms. Since the article was first published, the “new” risk management has become commonplace and...

At one time, risk management was limited to insurance and the avoidance of lawsuits and accidents. The new risk management also includes using tools developed for pricing financial options for the management of financial risks within the firm. Trading in financial markets based on these tools...