They hedge their own exposure to interest-rate risk through derivative contracts.

ECONOMIST: Freddie Mac and Fannie Mae

Lately it has been working on a futures product that would let clients hedge their real estate risk and a derivative for trading in biodiesel futures.

FORBES: On The Cover/Top Stories

Just remember that ETFs are ultimately, like a complicated mortgage derivative, subject to counter-party risk.

FORBES: Gold ETFs And The Manipulation Game

The reform will reduce the risk that institutions that wrote these derivative contracts - like Lehman Brothers or AIG - fail to pay out the amount they owe when they go bust.

BBC: Q&A: US Senate's banking regulation bill

Since the last week of September the apparent risk of a Commerzbank default, on the basis of derivative prices, has nearly trebled (see chart).

ECONOMIST: Commerzbank

The concept of a derivative product, with a value that depends on at least one risk factor, has been the greatest financial-product innovation of the 20th century.

ECONOMIST: Letters

Reckless traders take on way too much risk and the position in a stock, bond or ginned-up derivative du jour collapses.

FORBES: The JPMorgan London Whale: Now it's Criminal?

There are also those in the wings with another product to flog: a foreign-exchange derivative which, because it is a bet settled for cash, also reduces Herstatt risk.

ECONOMIST: Foreign exchange

In some cases the participants in the derivative trade have had each other as a counterparty on other trades and thus have reduced their net risk.

FORBES: Briefing Book: A. Michael Lipper

Bringing complicated derivative exchanges out of the shadows would enhance market-price transparency, and increased collateral requirements would reduce the risk of investors and banks being wiped out by mistaken trades that allegedly threaten the financial system.

FORBES: Magazine Article