Participants in derivatives markets are generally classified as hedgers and speculators. Hedgers use derivatives as their main purpose to protect themselves from adverse changes while speculators enter into a derivative contract with an attempt to profit from expected changes in market prices. One of the biggest questions regarding the treatment of derivative instruments is whether they are actually used for hedging or speculation purposes. (Adam and Fernando 2006) According to Guay (1999) firms can drastically reduce risk through the use of derivatives. But in the same research he finds that derivatives could be used to increase or decrease risk. Guay (1999) undertakes an empirical examination of new derivative users in an attempt to discover whether derivatives are used to reduce firm risk. The findings show that companies use derivatives to protect themselves, not to speculate by increasing corporate risk. The survey is conducted on a sample of 254 non-financial companies that started using derivatives and the results indicate that during this period the risk of companies decreased by approximately...