Explanation:
Correct answer: B
Hull emphasizes that effective risk management depends on clearly defined risk limits and the continuous, daily monitoring of those limits.
Why the other choices are incorrect:
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Question 140.1 John Hull is most likely to agree with which of the following statements about the risks of derivatives?
A
Hedgers and arbitrageurs have a productive role in markets, but speculators intensify systematic risk and do not have a productive role
B
A primary risk management practice is the definition and vigilant, daily monitoring of risk limits
C
Few of the spectacular derivatives mishaps arose from the activities of a single employee; most arose from large groups
D
Derivatives are inappropriate for non-financial companies and should generally be used only by financial firms
