This project studies how nonfinancial firms use derivatives markets. Financial derivatives allow corporate firms to transfer risk to financial institutions. Combining French administrative datasets, we show that while nonfinancial firms’ derivatives positions are sizable relative to their costs, these positions largely cancel out at the aggregate level. This indicates that the net risk transferred from the corporate sector to the financial sector is much smaller than the gross risk hedged by the corporate sector, suggesting that financial derivatives mainly redistribute risk across firms. Furthermore, most hedging activity is concentrated in a few large firms. A case study of large commodity-intensive publicly listed French groups suggests that hedge derivatives significantly reduce firms’ accounting profit volatility. To interpret our findings, we use a toy model where firms face exogenous cash-flow risk and dynamically issue dividends and hedge. Using the model, we show how firm hedging can be used to test dynamic corporate finance models.