I'd say in general they allow different types of risk to be stripped out from investments and passed on to people who specifically want to take them. That makes

I'd say in general they allow different types of risk to be stripped out from investments and passed on to people who specifically want to take them. That makes it easier for businesses (and individuals) to make plans. For instance a company could invest in a foreign market but hedge out the FX risk. They could even find a company in the foreign market who operates in their country and do a currency swap, meaning both parties get rid of unwanted risk.