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Transfer of risk to an insurer in exchange for payment of a premium. Real-life example: Purchasing health insurance to cover medical expenses.

Financial contracts whose value is derived from the performance of an underlying asset. Real-life example: Farmers using futures contracts to hedge against price fluctuations of crops.

Investment strategy to offset potential losses in another asset. Real-life example: An investor buying a put option to protect against a decline in stock value.

Insurance for insurance companies to transfer part of the risk they assume. Real-life example: A property insurer taking out reinsurance to cover catastrophic events.

Transfer responsibility and associated risks to a third-party contractor. Real-life example: A construction company hiring a roofing subcontractor and transferring the roofing liability.

A type of insurance policy where a surety company takes on the risk of the principal's failure to meet the contract. Real-life example: A contractor obtaining a surety bond to guarantee completion of a building to the owner.

A promise by a manufacturer or vendor to repair or replace defective goods. Real-life example: Electronics manufacturer offering a 1-year warranty on its products.

A third-party holds an asset or funds before they are transferred from one party to another. Real-life example: Money held in escrow by an agent until a real estate transaction closes.

Business structure that protects personal assets from company debts and liabilities. Real-life example: An entrepreneur forming an LLC to start a business and protect personal assets from business risks.

Agreements where one party agrees to indemnify the other against loss or damage. Real-life example: Construction contracts that include indemnity clauses for potential job site accidents.

Insurance policy providing protection against the cost of repair or replacement of faulty products. Real-life example: An appliance store offering extended warranty insurance on household appliances.

Bonds issued to guarantee the satisfactory completion of a project by a contractor. Real-life example: Government requiring a performance bond from a contractor for a public infrastructure project.

Financial swap agreement that the seller will compensate the buyer in the event of a loan default or other credit event. Real-life example: Banks buying CDS to hedge against the risk of loan defaults.

Contracting out business processes to a third-party provider. Real-life example: A company outsourcing its customer service operations to a specialized firm.