In my example, the airline could buy a forward contract or a call option on jet fuel to hedge its risk and thereby increase its financial stability. A relatively new type of derivative - credit derivatives - has gotten considerable attention lately because of its very rapid growth.
Credit derivatives allow a firm to purchase protection against the risk of loss from the default of a given entity. By doing so, financial and nonfinancial firms alike can limit or reduce their exposures to given borrowers or counterparties.