This chapter introduces the theoretical and empirical foundations of modern risk and portfolio management as well as derivative financial instruments. First, the basic principles of neoclassical capital market theory and behavioral economics are presented in Sect. 2.1. The following Sect. 2.2 outlines the perception of risks and the resulting motivation to hedge these risks. Subsequently, the fundamentals and possibilities of modern portfolio and risk management, based on the work of Markowitz, Sharpe, and Fama, are discussed in Sect. 2.3. The basics of option and futures pricing are then explained in Sect. 2.4, before the remaining residual risks that persist for investors even when hedging strategies are employed are highlighted in Sect. 2.5. Sect. 2.6 describes the performance and risk measurement metrics used in this work, as well as the sensitivity measures for derivatives (the so-called Greeks) and their calculation. Based on this, my hypotheses are formulated and explained in Section 2.7.