<abstract xmlns="http://www.w3.org/1999/xhtml"> Globalization of financial markets led to the enormous growth of volume and diversification of financial transactions. Financial derivatives were the basic elements of this growth. Derivatives play a useful and important role in hedging and risk management, but they also pose several dangers to the stability of financial markets and thereby the overall economy. Derivatives are used to hedge and speculate the risk associated with commerce and finance.When used to hedge risks, derivative instruments transfer the risks from the hedgers, who are unwilling to bear the risks, to parties better able or more willing to bear them. In this regard, derivatives help allocate risks efficiently between different individuals and groups in the economy. Investors can also use derivatives to speculate and to engage in arbitrage activity. Speculators are traders who want to take a position in the market; they are betting that the price of the underlying asset or commodity will move in a particular direction over the life of the contract.In addition to risk management, derivatives play a very useful economic role in price discovery and arbitrage. Financial derivatives trading are based on leverage techniques, earning enormous profits with small amount of money.</abstract>

Globalization of financial markets led to the enormous growth of volume and diversification of financial transactions. Financial derivatives were the basic elements of this growth. Derivatives play a useful and important role in hedging and risk management, but they also pose several dangers to the stability of financial markets and thereby the overall economy. Derivatives are used to hedge and speculate the risk associated with commerce and finance.When used to hedge risks, derivative instruments transfer the risks from the hedgers, who are unwilling to bear the risks, to parties better able or more willing to bear them. In this regard, derivatives help allocate risks efficiently between different individuals and groups in the economy. Investors can also use derivatives to speculate and to engage in arbitrage activity. Speculators are traders who want to take a position in the market; they are betting that the price of the underlying asset or commodity will move in a particular direction over the life of the contract.In addition to risk management, derivatives play a very useful economic role in price discovery and arbitrage. Financial derivatives trading are based on leverage techniques, earning enormous profits with small amount of money.

Global Derivatives Market

Macedonia (the former Yugoslav Republic of)

SEEU Review

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{"article-title":"Global Derivatives Market"}

Globalization of financial markets led to the enormous growth of volume and diversification of financial transactions. Financial derivatives were the basic...

Global Derivatives Market

Published Online: May 11, 2017

Page range: 81 - 93

DOI: https://doi.org/10.1515/seeur-2017-0006

Keywords
financial derivatives, leverage, risk management, hedge, speculation, organized exchange, over-the counter market

© South East European University

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Global Derivatives Market

Published Online: May 11, 2017

Page range: 81 - 93

DOI: https://doi.org/10.1515/seeur-2017-0006

Keywordsfinancial derivatives, leverage, risk management, hedge, speculation, organized exchange, over-the counter market

© South East European University

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 License.

Keywords
financial derivatives, leverage, risk management, hedge, speculation, organized exchange, over-the counter market