https://www.thehindubusinessline.com/opinion/derivatives-can-d | 🧿 Sociology UPSC Optional 🧿

https://www.thehindubusinessline.com/opinion/derivatives-can-de-risk-agriculture/article65947595.ece

Credit- Dear IAS Officer Ananya

Try to Connect the above article with Risk Society and Reflexivity.

Risk society is how modern society organizes in response to risk. The term is closely associated with several key writers on modernity, in particular, Ulrich Beck and Anthony Giddens. The German sociologist Ulrich Beck defines Risk Society as "a systematic way of dealing with hazards and insecurities induced and introduced by modernisation itself"

Reflexivity is the idea that as a society examines itself, it in turn changes itself in the process. Giddens and Beck argue that societies can assess the level of risk that is being produced, or that is about to be produced. This sort of reflexive introspection can in turn alter the planned activities themselves

Example -The risk associated with the enterprise of farming. are umpteen — monsoon cycles, price uncertainty, supply-chain inconsistencies, perishable output, etc.

Reflexivity of the risk- This risk can be filled by leveraging the derivatives market for agricultural commodities. Futures and options are derivative instruments that derive their value from an underlying asset, and derivative contracts involve an agreement to buy or sell the asset at an agreed price on a future date.


if the price of the commodity falls in the future, the farmer can sell at the pre-decided price to the seller, but if the price rises, the farmer can sell in the open market. To buy the put option, the buyer has to pay a fixed premium to option writers who act as insurers. Through this mechanism, the risk is transferred from the farmer to the market participants who are willing and capable of taking risks for a premium


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