Some observers of derivatives markets agree that publicly traded corporations can use derivatives to mitigate operating risks but that shareholders would be better off if managers simply allowed shareholders to use their own portfolio management and hedging techniques to do so themselves. In fact, some critics argue that corporate managers are too concerned about mitigating risks and that they do so to protect their own jobs and preserve their own income and stock value.

a. Why might shareholders be in a better position to mitigate and hedge operating risks of corporations whose shares they own?

b. Why might shareholders be better off if corporate managers continue to hedge operating and financial risks?