One undeniable characteristic of the past few decades is greater concern with the volatility in foreign exchange rates, interest rates, market prices for securities, and commodity prices than in previous decades. These fluctuations in financial prices can have significant effects on the fortunes of companies. For example, large scale changes in exchange rates have lead to dramatic changes in the competitive structure of markets that have caused companies to be nearly driven out of markets where they formerly held comfortable market shares review.

Well known examples are the US firms Caterpillar and Kodak or the experiences of the German car producers Volkswagen1 and Porsche on the US market. Often times, management became aware of the importance of these price risks for the financial results of companies only after incurring significant losses.

Previously, shareholders and stakeholders accepted explanations that unfavorable and unforeseeable movements of prices not under the control of management resulted in poor financial results. Nowadays, they increasingly expect management to be able to identify and manage exposures to such market risks.

The task of managing these risks has been facilitated by the increasing availability of a variety of instruments to transfer financial price risks to other parties. In particular, markets for derivative instruments such as forwards and futures, swaps and options, and innovative combinations of these building blocks of financial instruments have developed and grown at a breathtaking pace in the past few decades.