Explain how the Derivatives can Be Used to Determine Maximum Profit and Minimal Cost

Iram Mehmood Ch, Nadia Hanif, Saima Irum


Derivatives are the contracts between two or more than two parties but there is not the actual or true exchange in it. Derivative transactions include a wide range of financial contracts including futures, structured debt obligations and deposits, options, swaps, caps, forwards, floors and various arrangements thereof. A derivative provides the number of benefit in different ways to organizations. For example, it facilitates the buying and selling of risk. Many people believe that derivatives have a positive impact on the economic system. In contrast, the derivatives are also criticized for many reasons. One most important reason is derivatives largely leverage the debt in an economy which can provide the foundation of a depression or recession. In this article we aim to resolve how the derivatives are used to determine the maximum profit and minimum cost. The decision regarding the point on which our profit should be maximized and the cost of the product should be minimized is one of the most important ones in the life and the existence of the organizations. This article helps the organizations and researchers to check how the derivatives can be used to determine the maximum profit and the minimum cost.

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ISSN: 2310-4031

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