Introduction:
Metal recycling plays a crucial role in the sustainable management of resources and the reduction of environmental impact. Metals are valuable materials that can be reused indefinitely, making recycling an effective way to conserve energy, reduce greenhouse gas emissions, and minimize the need for destructive mining practices. This guide aims to provide a comprehensive overview of metal recycling, including its importance, the recycling process, common metals recycled, and the benefits of metal recycling.

The Importance of Metal Recycling:
Metal recycling is vital for several reasons. Firstly, it helps conserve natural resources. Metals such as aluminum, copper, and steel are finite resources, and extracting them from the earth's crust requires significant energy and has a detrimental impact on the environment. By recycling metals, we can reduce the need for extraction and preserve these resources for future generations.
Secondly, metal recycling reduces energy consumption. The energy required to produce new metals from raw materials is considerably higher compared to the energy needed for recycling. Recycling metal not only saves energy but also reduces greenhouse gas emissions associated with the mining, transportation, and processing of ores.

The Metal Recycling Process:
The metal recycling process typically involves several stages:
a) Collection: Metal scrap is collected from various sources, including industrial waste, consumer goods, and discarded appliances. Collection methods can range from curbside pickup to dedicated recycling centers.

b) Sorting: After collection, the metal scrap is sorted into different categories based on metal type, such as aluminum, steel, copper, brass, etc. Sorting is crucial to ensure efficient recycling and prevent contamination.

c) Shredding and Crushing: Once sorted, the scrap metal is shredded or crushed into smaller pieces. This process increases the surface area, making it easier to separate impurities and prepare the metal for melting.

d) Melting and Purification: The shredded metal is then melted in a furnace at high temperatures. During the melting process, impurities are removed, and the molten metal is purified. The purified metal is formed into ingots or other shapes for further processing.

e) Forming and Fabrication: The recycled metal can be used to manufacture new products or components. It can undergo processes such as rolling, forging, casting, or extrusion to create different shapes and sizes according to specific requirements.

Commonly Recycled Metals:
Various metals are commonly recycled due to their high demand and recyclability. The most frequently recycled metals include:
a) Aluminum: Aluminum recycling is prevalent due to its lightweight, corrosion resistance, and widespread use in packaging (e.g., cans) and transportation industries. Recycled aluminum requires only a fraction of the energy used in primary production, making it highly cost-effective.

b) Steel: Steel is the most recycled material globally. It is used in construction, appliances, and automotive industries due to its strength and durability. Recycling steel saves significant amounts of energy and reduces the need for iron ore extraction.

c) Copper: Copper is a highly HSS Scrap valued metal due to its excellent electrical conductivity and corrosion resistance. It is extensively used in electrical wiring, plumbing, and electronics. Recycling copper helps conserve natural resources and reduces environmental impact.

d) Brass: Brass, an alloy of copper and zinc, is widely used in plumbing fixtures, musical instruments, and decorative items. Recycling brass reduces the need for mining both copper and zinc ores, leading to energy savings and reduced greenhouse gas emissions.

Benefits of Metal Recycling:
Metal recycling offers numerous environmental, economic, and social benefits:
a) Resource Conservation: Recycling metals conserves natural resources, reduces the demand for primary extraction, and helps preserve the environment.

b) Energy Savings: Recycling metals consumes significantly less energy compared to primary production, resulting in reduced greenhouse gas emissions and fossil fuel consumption.

c) Waste Reduction: By recycling metal scrap, we divert waste from landfills and promote a circular economy where materials are reused rather than disposed of.

d) Job Creation: Metal recycling contributes to employment opportunities in collection, sorting, processing, and manufacturing industries.

e) Economic Growth: Metal recycling is an integral part of the scrap metal industry, which generates billions of dollars in economic activity globally.

Conclusion:
Metal recycling is a critical component of sustainable waste management and resource conservation. By understanding the importance of metal recycling, the recycling process, and the common metals that can be recycled, individuals and businesses can actively participate in reducing their environmental footprint. Embracing metal recycling not only conserves resources and saves energy but also contributes to a cleaner, greener, and more sustainable future for generations to come.

T-shirts are a timeless and versatile wardrobe staple that can be found in everyone's closet. Whether you're looking for a casual everyday outfit or something to express your personal style, a well-fitting and carefully chosen t-shirt can make all the difference. In this comprehensive guide, we will explore the different styles, fits, and materials available in t-shirts, along with valuable tips on how to care for them. By the end, you'll be equipped with all the knowledge you need to make informed choices when it comes to selecting, wearing, and maintaining your t-shirt collection.

I. Understanding T-Shirt Styles:

T-shirts come in various styles, each offering unique features and designs. Here are some popular styles you should be familiar with:

Crew Neck: The crew neck is a classic and versatile t-shirt style that features a rounded neckline. It's suitable for most body types and can be easily dressed up or down.

V-Neck: V-neck t-shirts have a V-shaped neckline that elongates the neck and adds a touch of sophistication to your look. They work well for those with broader shoulders or round faces.

Henley: Henley t-shirts feature a buttoned placket and a collarless neckline, creating a casual yet stylish look. They're great for layering or achieving a more laid-back appearance.

Raglan: Raglan sleeve t-shirts have a diagonal seam that extends from the collar to the underarm. This style provides a sporty and athletic aesthetic, making it perfect for active wear.

Polo: Polo shirts are a slightly dressier version of t-shirts. They have a collar and buttoned placket, giving them a more refined and preppy look.

II. Choosing the Right Fit:

Selecting the right fit is crucial for both comfort and style. Here are the main t-shirt fits you'll encounter:

Regular Fit: Regular fit t-shirts have a relaxed cut and offer a comfortable, loose feel. They're suitable for most body types and provide a classic casual look.

Slim Fit: Slim fit t-shirts have a narrower cut and hug the body more closely. They provide a more tailored appearance and are ideal for individuals with a slim or athletic build.

Athletic Fit: Athletic fit t-shirts are designed for those with a more muscular build. They offer a wider shoulder and chest area while tapering down towards the waist, creating a flattering silhouette.

Oversized Fit: Oversized t-shirts are currently on-trend and offer a relaxed and effortlessly stylish look. They have a loose, baggy fit and can be paired with skinny jeans or leggings for a balanced outfit.

III. Fabrics and Materials:

The choice of fabric and material plays a significant role in the comfort and durability of your t-shirts. Here are some common fabrics used in t-shirt manufacturing:

Cotton: Cotton is a natural fiber that is breathable, soft, and comfortable. It's the most popular choice for t-shirts due to its versatility and ability to absorb moisture.

Polyester: Polyester is a synthetic fabric that is durable, wrinkle-resistant, and quick-drying. It's often blended with other materials to enhance the t-shirt's durability and stretch.

Blends: T-shirts made from fabric blends, such as cotton-polyester blends, offer the benefits of both materials. They combine the softness and breathability of cotton with the strength and quick-drying properties of polyester.

Organic and Sustainable Materials: For those concerned about the environment, organic cotton, hemp, or bamboo t-shirts are excellent options. These materials are grown without harmful chemicals and are more sustainable in the long run.

T-Shirts:

Proper care and maintenance of your t-shirts will not only prolong their lifespan but also keep them looking fresh and comfortable. Here are some essential tips for t-shirt care:

Washing Instructions: Always check the care label on your t-shirts for specific washing instructions. In general, machine wash your t-shirts in cold water to prevent color fading and shrinkage. Use a mild detergent and avoid using bleach, as it can damage the fabric.

Drying: Air drying is the best option for t-shirts, as it helps maintain their shape and prevents shrinking. If you need to use a dryer, choose a low heat setting to minimize the risk of damage. Avoid over-drying, as it can lead to excessive wrinkling.

Ironing: Most t-shirts don't require ironing, especially if you hang them to dry properly. However, if you prefer a more polished look, use a low to medium heat setting on your iron and iron the t-shirt inside out to avoid direct contact with the print or design.

Stain Removal: Treat stains promptly to prevent them from setting into the fabric. Gently blot the stain with a stain remover or mild detergent before washing. Avoid rubbing vigorously, as it can damage the fabric fibers.

Folding and Storage: Fold your t-shirts neatly to minimize wrinkles. Avoid hanging them for extended periods, as it can stretch the fabric. Store your t-shirts in a cool, dry place away from direct sunlight to prevent color fading.

V. Styling Tips:

Now that you have a solid understanding of t-shirt styles, fits, materials, and care, let's explore some styling tips to elevate your t-shirt game:

Layering: T-shirts are incredibly versatile for layering. Pair a crew neck or V-neck t-shirt with a lightweight jacket or cardigan for a stylish and casual look. Experiment with different color combinations to create visually appealing outfits.

Dressing Up: T-shirts can be dressed up for more formal occasions. Opt for a slim-fit or polo t-shirt and pair it with tailored trousers or a skirt. Add accessories like a blazer, statement necklace, or heels to elevate the look.

Casual Chic: For a relaxed and effortless look, style an oversized t-shirt with high-waisted jeans or shorts. Complete the outfit with sneakers or sandals and accessorize with a hat or sunglasses for a touch of personality.

Graphic Tees: Graphic t-shirts are a great hats way to showcase your interests, personality, or sense of humor. Pair them with neutral bottoms to let the design stand out or mix patterns and colors for a bold and eclectic look.

Tucked-In or Untucked: Experiment with different tucking styles to create different vibes. Tucking a t-shirt into high-waisted pants or skirts can define the waist and create a polished appearance. Leaving the t-shirt untucked offers a more relaxed and casual vibe.

Conclusion:

T-shirts are a wardrobe staple that offers endless possibilities for personal style and comfort. By understanding the different styles, fits, fabrics, and caring for your t-shirts, you can build a versatile collection that lasts. From casual everyday outfits to dressed-up ensembles, t-shirts can be effortlessly incorporated into a wide range of looks. Remember to embrace your individuality, experiment with different combinations, and have fun expressing yourself through the timeless and versatile t-shirt.

The cultural and creative sector is a diverse and vibrant field that encompasses various industries, including art, music, literature, film, theater, design, fashion, and more. As this sector continues to evolve and thrive, conducting effective research becomes crucial for policymakers, academics, professionals, and organizations aiming to understand, support, and contribute to its growth. This guide aims to provide a comprehensive overview of cultural and creative sector research, including its importance, methodologies, data sources, and practical tips for conducting meaningful studies.

Importance of Cultural & Creative Sector Research
In this section, we explore the economic, social, and policy-related reasons why research in the cultural and creative sector is crucial. We discuss how the sector contributes to economic growth, enhances social well-being, and informs policy development.

Defining Research Objectives
Clearly defining research objectives and formulating research questions and hypotheses are fundamental steps in conducting any study. This section provides guidance on identifying key research questions and hypotheses specific to the cultural and creative sector.

Research Methodologies
Different research methodologies can be employed to investigate the cultural and creative sector. We discuss quantitative, qualitative, and mixed-method research approaches and their suitability for various research objectives.

Data Collection
This section delves into primary and secondary data sources commonly used in cultural and creative sector research. It outlines methods for collecting primary data through surveys, interviews, and observations, as well as utilizing secondary data from existing studies, reports, databases, and online platforms.

Sampling Techniques
Sampling techniques play a crucial role in cultural and creative sector research. This section explores various sampling techniques, including probability sampling (such as simple random sampling, systematic sampling, and stratified sampling) and non-probability sampling (such as convenience sampling, purposive sampling, and snowball sampling). It discusses the advantages, limitations, and appropriate use cases for each technique.

Data Analysis and Interpretation
Once data is collected, it needs to be analyzed and interpreted to derive meaningful insights. This section covers quantitative analysis techniques, such as descriptive and inferential statistics, as well as qualitative analysis methods, including thematic analysis, content analysis, and grounded theory. It provides guidance on selecting the appropriate analysis techniques based on the nature of the research questions and data.

Ethical Considerations in Cultural & Creative Sector Research
Ethical considerations are paramount in any research endeavor. This section addresses the ethical aspects specific to cultural and creative sector research, such as obtaining informed consent, ensuring confidentiality and data protection, and being culturally sensitive when working with diverse communities.

Challenges and Limitations
Conducting research in the cultural and creative sector comes with its own set of challenges and limitations. This section discusses common obstacles, such as the lack of standardized data, difficulties in accessing rccil.org.uk reliable information, and the complexities of measuring and valuing creative outputs and contributions. It also explores potential strategies to overcome these challenges.

Case Studies in Cultural & Creative Sector Research
Case studies provide real-world examples of cultural and creative sector research. This section presents a selection of case studies that demonstrate the application of research methodologies and highlight the impact of the cultural and creative sector in various domains, such as community well-being, the film industry, and cultural tourism.

Disseminating Research Findings
Sharing research findings is essential for creating an impact and driving change in the cultural and creative sector. This section explores different avenues for disseminating research findings, including academic publications, conference presentations, policy briefs, reports, and engaging with the media and the public.

Future Directions in Cultural & Creative Sector Research
As the cultural and creative sector continues to evolve, new research avenues emerge. This section explores future directions in cultural and creative sector research, including the impact of technological advancements, globalization, cross-cultural studies, and sustainability considerations.

Conclusion
The conclusion summarizes the key points covered in the guide and emphasizes the importance of cultural and creative sector research in understanding and supporting the growth and development of this dynamic field.

By following this comprehensive guide, researchers, policymakers, academics, and professionals can embark on meaningful cultural and creative sector research endeavors, contributing to the knowledge base and fostering the continued growth and sustainability of this vibrant sector.

A financial market refers to a marketplace where various kinds of financial securities such as stocks, bonds, commodities, etc. are traded. The term ‘market’ can also refer to exchanges that are legal organizations that facilitate the trade of financial securities between buyers and sellers. In any case, these markets are categorized based of the type of financial securities that are traded through them. One such financial market is the Derivatives Market.

Derivatives market thus refers to the financial marketplace where derivative instruments such as futures, forwards and options contracts are traded between counterparties.

It was during the 1980s and 1990s that the financial markets saw a major growth in the trade of derivatives. A derivative is a financial instrument whose value is derived from the value of an underlying asset such as stocks, bonds, currencies, commodities, interest rates and/or different market indices. These underlying assets have fluctuating prices and returns, and derivatives provides a means to investors to reduce the risk exposure and leverage profits on these assets. Thus, derivatives are an essential class of financial instruments and central to the modern financial markets providing not just economic benefits but also resilience against risks. The most common derivatives include futures, forwards, options and swap contracts.

As per the European Securities and Markets Authority (ESMA), derivatives market has grown impressively (around 24 percent per year in the last decade) into a truly global market with over €680 trillion of notional amount outstanding. The interest rate derivatives (IRDs) accounted for 82% of the total notional amount outstanding followed by currency derivatives at 11%.

Main types of derivative contracts
Derivatives derive their value from an underlying asset, or simply an ‘underlying’. There is a wide range of financial instruments that can be an underlying for a derivative such as equities or equity index, fixed-income instruments, foreign currencies, commodities, and even other securities. And thus, depending on the underlying, derivative contracts can derive their values from corresponding equity prices, interest rates, foreign exchange rates, prices of commodities and probable credit events. The most common types of derivative contracts are elucidated below:

Forwards and Futures
Forward and futures contracts share a similar feature: they are an agreement between two parties to buy or sell a specified quantity of an underlying asset at a specified price (or ‘exercise price’) on a predetermined date in the future (or ‘expiration date’). While forwards are customized contracts i.e., they can be tailor-made according to the asset being traded, expiry date and price, and traded Over-the-Counter (OTC), futures are standardized contracts traded on centralized exchanges. The party that buys the underlying is said to be taking a long position while the party that sells the asset takes a short position and both parties are obligated to fulfil their part of the contract.

Options
An option contract is a financial derivative that gives its holder the right (but not the obligation) to trade an underlying asset at a price set in advance irrespective of the market price at maturity. When an option is bought, its holder pays a fixed amount to the option writer as cost for this flexibility of trading that the option provides, known as the premium. Options can be of the types: call (right to buy) or put (right to sell).

Swaps
Swaps are agreements between two counterparties to exchange a series of cash payments for a stated period of time. The periodic payments charged can be based on fixed or floating interest rates, depending on contract terms decided by the counterparties. The calculation of these payments is based on an agreed-upon amount, called the notional principal amount (or just notional).

Exchange-traded vs Over-the-counter Derivatives Market
Exchange-traded derivatives markets
Exchange-traded derivatives markets are standardized markets for derivatives trading and follows rules set by the exchange. For instance, the exchange sets the expiry date of the derivatives, the lot-size, underlying securities on which derivatives can be created, settlement process etc. The exchange also performs the clearing and settlement of trades and provide credit guarantee by acting as a counterparty for every trade of derivatives. Thus, exchanges provide a transparent and systematic course of action for any derivatives trade.

Over-the-counter markets
Over-the-counter (also known as “OTC”) derivatives markets on the other hand, provide a lesser degree of regulations. They were almost entirely unregulated before the financial crisis of 2007-2008 (also a time when derivatives markets were criticized, and the blame was placed on Credit Default Swaps). OTCs are customized markets and run by dealers who hedge risks by indulging in derivatives trading.

Types of market participants
The participants in the derivative markets can be categorized into different groups namely,

Hedgers
Hedging is a risk-neutralizing strategy when an investor seeks to protect a current or anticipated position in the market by limiting their risk exposure. They can do so by taking up an offset or counter position through derivative contracts. Parties such as individuals or companies who perform hedging are called Hedgers. The hedger thus aims to eliminate volatility against fluctuating prices of underlying securities and protect herself/himself from any downsides.

Speculators
Speculation is a very common technique used by traders and investors in the derivatives market. It is based on when traders have a strong viewpoint regarding the market behavior of any underlying security and though it is risky, if the viewpoint is correct, the speculation may reward with attractive payoffs. Thus, speculators use derivative contracts with a view to make profit from the subsequent price movements. They do not have any risk to hedge, in fact, they operate at a relatively high-risk level in anticipation of profits and provide liquidity in the market.

Arbitrageurs
Arbitrage is a strategy in which the participant (or arbitrageur) aims to make profits from the price differences which arise in the investments made in the financial markets as a result of mispricing. Arbitrageurs aim to earn low risk profits by taking two different positions in the same or different contracts (across different time periods) or on different exchanges to in-cash on price discrepancies or market inefficiencies.

Margin Traders
Margin is essentially the collateral amount deposited by an investor investing in a financial instrument to the counterparty in order to cover for the credit risk associated with the investment. In margin trading, the trader or investor is not required to pay the total value of your position upfront. Instead, they only need pay the margin amount which may vary and are usually fixed by the stock exchanges considering factors like volatility. Thus, margin traders buy and sell securities over a single session and square off their position on the same day, making a derivative product comics quick payoff if their speculations are right.

Criticism of derivatives
While derivatives provide numerous benefits and have significantly impacted modern finance and markets, they pose many risks too. In a 2002 letter to Berkshire Hathaway shareholders, Warren Buffet even described derivatives as “financial weapons of mass destruction”.

Derivatives are more highly leveraged due to relatively relaxed regulations surrounding them, and where one may need to put up half the money or more with buying other securities, derivatives traders can get by with just putting up a few percentage points of the total value of a derivatives contract as a margin. If the price of the underlying asset keeps falling, covering the margin account can lead to enormous losses. Derivatives are thus often criticized as they may allow investors to obtain unsustainable positions that elevates systematic risk so much that it can be equated to legalized gambling. Derivatives are also exposed to counterparty credit risk wherein there is scope of default on the contract by any of the parties involved in the contract. The risk becomes even greater while trading on OTC markets which are less regulated.

Derivatives have been associated with a number of high-profile credit events over the past two decades. For instance, in the early 1990s, Procter and Gamble Corporation lost more than $100 million in transactions in equity swaps. In 1995, Barings collapsed when one of its traders lost $1.4 billion (more than twice its then capital) in trading equity index derivatives.

The amounts involved with derivatives-related corporate financial distresses in the 2000s increased even more. Two such events were the bankruptcy of Enron Corporation in 2001 and the near collapse of AIG in 2008. The point of commonality among these events was the role of OTC derivative trades. Being an AAA-rated company, AIG was being exempted from posting collateral on most of its derivatives trading in 2008. In addition, AIG was unique among CDS market participants and acted almost exclusively as credit protection seller. When the global financial crisis reached its peak in late 2008, AIG’s CDS portfolios recorded substantial mark-to-market losses. Consequently, the company was asked to post $40 billion worth of collateral and the US government had to introduce a $150 billion financial package to prevent AIG, once the world’s largest insurer by market value, from filing for bankruptcy.

Conclusion
Derivatives were essentially created in response to some fundamental changes in the global financial system. If correctly handled, they help improve the resilience of the system, hedge market risks and bring economic benefits to the users. Thus, they are expected to grow further with financial globalization. However, past credit events have exposed many weaknesses in the organization of their trading. The aim is to minimize the risks associated with such trades while enjoying the benefits they bring to the financial system. An important challenge is to design new rules and regulations to mitigate the risks and to promote transparency by improving the quality and quantity of statistics on derivatives markets.

A financial market refers to a marketplace where various kinds of financial securities such as stocks, bonds, commodities, etc. are traded. The term ‘market’ can also refer to exchanges that are legal organizations that facilitate the trade of financial securities between buyers and sellers. In any case, these markets are categorized based of the type of financial securities that are traded through them. One such financial market is the Derivatives Market.

Derivatives market thus refers to the financial marketplace where derivative instruments such as futures, forwards and options contracts are traded between counterparties.

It was during the 1980s and 1990s that the financial markets saw a major growth in the trade of derivatives. A derivative is a financial instrument whose value is derived from the value of an underlying asset such as stocks, bonds, currencies, commodities, interest rates and/or different market indices. These underlying assets have fluctuating prices and returns, and derivatives provides a means to investors to reduce the risk exposure and leverage profits on these assets. Thus, derivatives are an essential class of financial instruments and central to the modern financial markets providing not just economic benefits but also resilience against risks. The most common derivatives include futures, forwards, options and swap contracts.

As per the European Securities and Markets Authority (ESMA), derivatives market has grown impressively (around 24 percent per year in the last decade) into a truly global market with over €680 trillion of notional amount outstanding. The interest rate derivatives (IRDs) accounted for 82% of the total notional amount outstanding followed by currency derivatives at 11%.

Main types of derivative contracts
Derivatives derive their value from an underlying asset, or simply an ‘underlying’. There is a wide range of financial instruments that can be an underlying for a derivative such as equities or equity index, fixed-income instruments, foreign currencies, commodities, and even other securities. And thus, depending on the underlying, derivative contracts can derive their values from corresponding equity prices, interest rates, foreign exchange rates, prices of commodities and probable credit events. The most common types of derivative contracts are elucidated below:

Forwards and Futures
Forward and futures contracts share a similar feature: they are an agreement between two parties to buy or sell a specified quantity of an underlying asset at a specified price (or ‘exercise price’) on a predetermined date in the future (or ‘expiration date’). While forwards are customized contracts i.e., they can be tailor-made according to the asset being traded, expiry date and price, and traded Over-the-Counter (OTC), futures are standardized contracts traded on centralized exchanges. The party that buys the underlying is said to be taking a long position while the party that sells the asset takes a short position and both parties are obligated to fulfil their part of the contract.

Options
An option contract is a financial derivative that gives its holder the right (but not the obligation) to trade an underlying asset at a price set in advance irrespective of the market price at maturity. When an option is bought, its holder pays a fixed amount to the option writer as cost for this flexibility of trading that the option provides, known as the premium. Options can be of the types: call (right to buy) or put (right to sell).

Swaps
Swaps are agreements between two counterparties to exchange a series of cash payments for a stated period of time. The periodic payments charged can be based on fixed or floating interest rates, depending on contract terms decided by the counterparties. The calculation of these payments is based on an agreed-upon amount, called the notional principal amount (or just notional).

Exchange-traded vs Over-the-counter Derivatives Market
Exchange-traded derivatives markets
Exchange-traded derivatives markets are standardized markets for derivatives trading and follows rules set by the exchange. For instance, the exchange sets the expiry date of the derivatives, the lot-size, underlying securities on which derivatives can be created, settlement process etc. The exchange also performs the clearing and settlement of trades and provide credit guarantee by acting as a counterparty for every trade of derivatives. Thus, exchanges provide a transparent and systematic course of action for any derivatives trade.

Over-the-counter markets
Over-the-counter (also known as “OTC”) derivatives markets on the other hand, provide a lesser degree of regulations. They were almost entirely unregulated before the financial crisis of 2007-2008 (also a time when derivatives markets were criticized, and the blame was placed on Credit Default Swaps). OTCs are customized markets and run by dealers who hedge risks by indulging in derivatives trading.

Types of market participants
The participants in the derivative markets can be categorized into different groups namely,

Hedgers
Hedging is a risk-neutralizing strategy when an investor seeks to protect a current or anticipated position in the market by limiting their risk exposure. They can do so by taking up an offset or counter position through derivative contracts. Parties such as individuals or companies who perform hedging are called Hedgers. The hedger thus aims to eliminate volatility against fluctuating prices of underlying securities and protect herself/himself from any downsides.

Speculators
Speculation is a very common technique used by traders and investors in the derivatives market. It is based on when traders have a strong viewpoint regarding the market behavior of any underlying security and though it is risky, if the viewpoint is correct, the speculation may reward with attractive payoffs. Thus, speculators use derivative contracts with a view to make profit from the subsequent price movements. They do not have any risk to hedge, in fact, they operate at a relatively high-risk level in anticipation of profits and provide liquidity in the market.

Arbitrageurs
Arbitrage is a strategy in which the participant (or arbitrageur) aims to make profits from the price differences which arise in the investments made in the financial markets as a result of mispricing. Arbitrageurs aim to earn low risk profits by taking two different positions in the same or different contracts (across different time periods) or on different exchanges to in-cash on price discrepancies or market inefficiencies.

Margin Produit dérivé cinéma Traders
Margin is essentially the collateral amount deposited by an investor investing in a financial instrument to the counterparty in order to cover for the credit risk associated with the investment. In margin trading, the trader or investor is not required to pay the total value of your position upfront. Instead, they only need pay the margin amount which may vary and are usually fixed by the stock exchanges considering factors like volatility. Thus, margin traders buy and sell securities over a single session and square off their position on the same day, making a quick payoff if their speculations are right.

Criticism of derivatives
While derivatives provide numerous benefits and have significantly impacted modern finance and markets, they pose many risks too. In a 2002 letter to Berkshire Hathaway shareholders, Warren Buffet even described derivatives as “financial weapons of mass destruction”.

Derivatives are more highly leveraged due to relatively relaxed regulations surrounding them, and where one may need to put up half the money or more with buying other securities, derivatives traders can get by with just putting up a few percentage points of the total value of a derivatives contract as a margin. If the price of the underlying asset keeps falling, covering the margin account can lead to enormous losses. Derivatives are thus often criticized as they may allow investors to obtain unsustainable positions that elevates systematic risk so much that it can be equated to legalized gambling. Derivatives are also exposed to counterparty credit risk wherein there is scope of default on the contract by any of the parties involved in the contract. The risk becomes even greater while trading on OTC markets which are less regulated.

Derivatives have been associated with a number of high-profile credit events over the past two decades. For instance, in the early 1990s, Procter and Gamble Corporation lost more than $100 million in transactions in equity swaps. In 1995, Barings collapsed when one of its traders lost $1.4 billion (more than twice its then capital) in trading equity index derivatives.

The amounts involved with derivatives-related corporate financial distresses in the 2000s increased even more. Two such events were the bankruptcy of Enron Corporation in 2001 and the near collapse of AIG in 2008. The point of commonality among these events was the role of OTC derivative trades. Being an AAA-rated company, AIG was being exempted from posting collateral on most of its derivatives trading in 2008. In addition, AIG was unique among CDS market participants and acted almost exclusively as credit protection seller. When the global financial crisis reached its peak in late 2008, AIG’s CDS portfolios recorded substantial mark-to-market losses. Consequently, the company was asked to post $40 billion worth of collateral and the US government had to introduce a $150 billion financial package to prevent AIG, once the world’s largest insurer by market value, from filing for bankruptcy.

Conclusion
Derivatives were essentially created in response to some fundamental changes in the global financial system. If correctly handled, they help improve the resilience of the system, hedge market risks and bring economic benefits to the users. Thus, they are expected to grow further with financial globalization. However, past credit events have exposed many weaknesses in the organization of their trading. The aim is to minimize the risks associated with such trades while enjoying the benefits they bring to the financial system. An important challenge is to design new rules and regulations to mitigate the risks and to promote transparency by improving the quality and quantity of statistics on derivatives markets.