Laurie Seals and Julie Winn are roommates at Upland State College. Laurie majors in political science, and Julie is an accounting major. Recently, one of Laurie’s political science classes has been discussing the impact of derivative trading losses on the finances of several public institutions in the United States, including city governments and public colleges. The political science class has decided that derivatives are nothing more than a sophisticated form of gambling and that their trading in the United States should be banned.
How should Julie explain to Laurie that derivatives serve a vital business purpose?