The European Central Bank argues that despite an objective of hedging being to share risk, the effect can in fact be an increase in risk-taking, as negative news about the hedge creates an incentive problem for the seller. The paper points to the complex functions of derivatives contracts, which can be used for a wide range of purposes. With the Volcker Rule in the United States seeking to exempt hedging activity from its ban on proprietary trading for financial stability reasons, this paper shows that identifying the true benefits of hedging activity can be very difficult.