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Topic: Derivatives market

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Derivatives market

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	IPD's Capacity Building and Journalism Program; Economic Journalism Training
		Derivatives facilitate risk management by allowing a person to reduce his exposure to certain kinds of risk by transferring those risks to another person that is more willing and able to bear such risks.
		Derivatives were used to hide debt that should be reported in regular corporate reports, fabricate income on the same corporate reports and dodge taxes to the government.
		A series of derivatives between the same counterparties can be abused to create a loan from one firm to another that is not reported as debt but rather as income in one period when the "loan" is made and then a loss in a later period when the "loan" is repaid.
	www.gsb.columbia.edu /ipd/j_derivatives.html (3473 words)

	FDIC: FYI - Derivatives Risk in Commercial Banking
		Derivatives are important to the financial markets and the world economy because they provide a means for companies to separate and trade various kinds of risks.
		Derivatives dealers are exposed to at least the same risks as hedgers, and they incur additional operational risks as a result of the sheer volume of derivatives activity they undertake.
		Derivatives concentration risk is similar in concept to an industry concentration in that the counterparties to a dealer have an economic interrelationship through their involvement in a derivatives market that is dominated by a few dealers.
	www.fdic.gov /bank/analytical/fyi/2003/032603fyi.html (6527 words)

	Forex derivatives market (Site not responding. Last check: 2007-11-03)
		Although derivatives have been used in agricultural markets since the mid-1800s, much of the growth in their use over the past several decades has been in financial markets as a direct response to increased volatility in credit and foreign exchange markets.
		Derivative financial instruments include foreign exchange contracts, interest rate futures, currency and interest rate swaps, currency and interest rate options (both written and purchased) and other financial instruments that derive their value mainly from underlying interest rates, foreign exchange rates, commodity values or equity instruments.
		Derivatives are subject to various risks including market, liquidity and credit risk, similar to those related to the underlying financial instruments.
	hometown.aol.de /exchangeforex/forex-derivatives-market.html (1110 words)

	Derivatives and Risk Management in the Petroleum, Natural Gas, and Electricity Industries
		Derivatives have proven to be useful in the petroleum and natural gas industries, and they still are being used in the electricity industry despite the setbacks discussed in Chapter 4.
		Market prices are readily available for futures contracts traded on exchanges and for traded options; however, futures markets account for a minority of energy derivatives activity in the United States.
		The story of derivatives in the energy industry and the accounting for them is incomplete without an examination of the ways in which Enron and other companies have used derivatives for purposes other than risk management, such as managing reported earnings, and for other financial engineering goals, such as hiding debt.
	www.eia.doe.gov /oiaf/servicerpt/derivative/chapter5.html (3338 words)

	FSO Editorials: "The Coming Disaster in the Derivatives Market" by Michael J. Panzner 11.09.2005 (Site not responding. Last check: 2007-11-03)
		The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear....[They] are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.
		Derivatives are, generally speaking, contractual agreements that offer a means for individuals or businesses to restructure or rearrange the risks they may face in future.
		In their simplest form, derivatives provide for certain rights or obligations between two parties, or “counterparties.” Most important, the way in which these instruments are evaluated almost always takes into account that they are linked to some other security, commodity, event, or any of a wide variety of agreed-upon conditions.
	www.financialsense.com /editorials/2005/1109_b.html (5472 words)

	Derivatives market - Wikipedia, the free encyclopedia
		The derivatives markets are the financial markets for derivatives.
		The market can be divided into two, that for exchange traded derivatives and that for over-the-counter derivatives.
		The UK reinforced its position as the leading derivatives center with its share of turnover rising from 36% to 43% during this period.
	en.wikipedia.org /wiki/Derivatives_market (442 words)

	Weather Derivatives - Introduction
		The weather derivatives market was developed in response to the deregulation of the Power Industry.
		The emergence of the wholesale power market forced the role of the Utility to change from a monopoly to a market participant.
		The market has now expanded to include end user industries that are affected by the weather, such as beverage sales and agriculture.
	www.evomarkets.com /weather (183 words)

	Derivatives and CMO's
		A derivative is a "synthetic security created from a plain vanilla long term bond that also has a variety of options attached to it that can add a higher degree of volatility that would otherwise not be present in the underlying bond.
		Their values are derived from changes in underlying variable such as stock indexes, interest rates, currency and commodity prices, etc. One of the most commonly known to the layman is the CD whose rate is tied to the SandP index.
		Derivatives: (NY Times 2002) Unlike markets for stocks, bonds and commodities, where the assets traded and the details of those trades are easy to understand, the derivatives market is hardly transparent.
	www.efmoody.com /investments/derivatives.html (2147 words)

	SurvivalBlog.com - Derivatives
		A derivative can be a bet on a incremental market change in yet another bet on an incremental change--in effect a hedge on a hedge, or bet on a bet.
		For example, a derivatives trader makes a tidy profit when he bets that the Dow Jones will be 2.2% higher next year instead of the generally expected 1.9% Or another bets that higher fuel costs will put the pinch on bird guano miners in the South Pacific, curtailing their annual profits.
		The derivatives market was relatively small when the U.S. markets had their last big hiccup in 1987, and it was even smaller when the commodities markets went through their last big spikes in 1978 to 1981.
	www.survivalblog.com /derivatives.html (1452 words)

	Personal website of R.Kannan
		In some of the most widely reported mishaps in the derivatives market elsewhere, the underlying reason was inadequate internal control system at the user-firm itself so that overall exposure was not controlled and the use of derivatives was for speculation rather than for risk hedging.
		The Derivatives Exchange/ Segment should have arrangements for dissemination of information about trades, quantities and quotes on a real time basis through atleast two information vending networks, which are easily accessible to investors across the country.
		Additionally, for stock specific derivative contracts SEBI has specified that the lot size of the underlying individual security should be in multiples of 100 and fractions, if any, should be rounded of to the next higher multiple of 100.
	www.geocities.com /kstability/content/derivatives/derivatives1.html (2106 words)

	SEC Testimony: A. Levitt re OTC Derivatives Market etc.
		Any consideration of the issues facing the OTC derivatives market, such as legal certainty, the concerns of industry participants, and the role of U.S. financial regulators, must begin with an examination of how this market has evolved and which products are involved in the bilateral transactions conducted between market participants.
		The OTC derivatives market has grown substantially in recent years, and this growth is indicative of the strength and vitality of U.S. capital markets.
		The OTC derivatives market is a rapidly growing and extremely vital global market that crosses jurisdictional boundaries among the regulatory community.
	www.sec.gov /news/testimony/testarchive/1998/tsty0998.htm (2880 words)

	Weather Derivatives Market
		The early market participants saw weather derivatives as both a mechanism to hedge inherent weather exposure in their core energy assets and other energy commodity trading operations as well as a new risk management product to offer to regional utilities and other energy concerns alongside the array of structured products they were already providing.
		First, there was a close similarity between weather derivatives and traditional “mother nature” insurance products covering property damage and business interruption, and second there was a strong overlap between the skills needed to participate in the weather market and the insurance industry’s core actuarial and risk management expertise.
		The most common terms in the market are November 1 through March 31 for winter season contracts and May 1 through September 30 for summer contracts, however there have been an increasing volume of trading in one month and one week contracts as the market has grown.
	www.climetrix.com /WeatherMarket/MarketOverview (1339 words)

	Excitement in equity derivatives
		A derivatives market is said to have succeeded when the liquidity on the derivatives market is superior to that of the spot market.
		While market liquidity is important to the Indian economy, which cares about transactions costs, turnover is supremely important for market intermediaries, who derive revenues off turnover.
		It is a reminder of the enormous vitality and innovation that is found with the retail segment of the market, in contrast with the south Bombay institutional community.
	www.mayin.org /ajayshah/MEDIA/2001/equity-derivatives.html (1145 words)

	Derivative (finance) - Wikipedia, the free encyclopedia
		Derivatives can be based on different types of assets such as commodities, equities or bonds, interest rates, exchange rates, or indices (such as a stock market index, consumer price index (CPI)--see inflation derivatives--or even an index of weather conditions).
		In today's uncertain world, derivatives are increasingly being used to protect assets from drastic fluctuations and at the same time they are being re-engineered to cover all kinds of risk and with this the growth of the derivatives market continues.
		Other uses of derivatives are to gain an economic exposure to an underlying security in situations where direct ownership of the underlying is too costly or is prohibited by legal or regulatory restrictions, or to create a synthetic short position.
	en.wikipedia.org /wiki/Derivative_security (3306 words)

	Derivatives Strategy - April'99: Questions Facing the Credit Derivatives Market (Site not responding. Last check: 2007-11-03)
		Since this is a fledgling market and experience is in short supply, the laws of supply and demand take their inevitable toll.
		As in any nascent derivatives market, a lack of consensus on documentation is proving something of a damper on activity.
		If credit derivatives are to become a mainstream risk management tool for commercial banks, their modeling and use will have to appeal to a much wider universe of names.
	www.derivativesstrategy.com /magazine/archive/1999/0499fea4.asp?print (3112 words)

	Macroeconomic Derivatives
		In Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty, and Risk (NBER Working Paper No. 11929), Refet Gurkaynak and Justin Wolfers analyze the data derived from the first few years of this new market, focusing on the forecasts for non-farm payrolls, initial unemployment claims, retail trade, and business confidence.
		In addition, the authors report that financial market responses to economic news are better captured by market-based expectations than by the survey-based measures; again, this suggests that the financial market outcomes are better at capturing investor expectations.
		By using the institutional structure of economic derivatives to study risk and risk aversion, Gurkaynak and Wolfers surmise that economic derivatives are promising instruments for economists who would like to consider the relationship between investor's beliefs, risk attitudes, and asset prices.
	www.nber.org /digest/aug06/w11929.html (783 words)

	How mutual funds use derivatives
		Derivatives have become a much-discussed topic in the investment community and investors are curios to learn more about it.
		Derivatives like futures and options are used by mutual funds for hedging their portfolio to manage the risk, for speculation to clock profits and for arbitrage to earn risk-free profits.
		Although, derivatives trading in India has been in existence for more than five years, their use by mutual funds is of a relatively recent origin.
	www.rediff.com /money/2006/sep/12mf.htm (1144 words)

	Derivatives Market
		The new market is expected to increase liquidity and depth of spot markets.
		As the number of traded instruments increase and as the market develops, the number of members are also expected to increase.
		Customers willing to trade in the Derivatives Market are required to first sign a risk acceptance note stating that they have read and understood the “Risk Guide” that explains the characteristics of the market instruments.
	www.ise.org /markets/derivatives.htm (848 words)

	The Ballooning Credit Derivatives Market: Easing Risk or Making It Worse? - Knowledge@Wharton
		Looming over the market like an invisible and unpredictable giant is an estimated $25 billion in credit derivatives, a form of insurance whose value is directly linked to the ups and downs of Delphi debt.
		Market participants were also gaining experience with other forms of derivatives tied to stocks, commodities and currencies.
		Credit derivatives are contracts that go up or down to track the fortunes of underlying corporate debt, such as bonds the company has issued or loans it has taken out.
	knowledge.wharton.upenn.edu /article.cfm?articleid=1303 (2070 words)

	Just what are credit derivatives?
		Typically, a credit derivative instrument involves stripping the credit or default risk embodied with a bank loan or a corporate bond or a portfolio of such assets, thereby creating a separate financial instrument altogether.
		This is probably the most noteworthy feature of credit derivatives, i.e., instead of having derivatives written on the asset itself (as in case of equity derivatives), only the credit or default risk aspect of the loan (asset) is transformed into another hybrid and tradable instrument.
		Globally the credit derivatives market has grown spectacularly in recent years but it has yet to reach matured derivative markets in terms of liquidity, transparency and standardisation.
	www.rediff.com /money/2005/jul/21guest.htm (1215 words)

	Weather Derivatives - Market Background
		The weather derivatives markets are active and liquid with established products as well as innovative structures.
		In the regulated energy market, utilities were allowed to pass through losses associated with the weather to ratepayers.
		Utilities and power marketers now turn to the over-the-counter weather derivative markets to hedge exposure to the elements.
	www.evomarkets.com /weather/index.php?xp1=1 (306 words)

	Credit Derivatives: Friend or Foe?
		In the early 1990s the market was virtually nonexistent; by 2002 it was valued at slightly over US$2 trillion notional outstanding and Celent expects it to exceed US$7 trillion by 2006.
		Credit derivatives still account for just slightly more than one percent of the overall market for derivative contracts among commercial banks.
		However, the overall derivatives market increased less than three-fold from 1997 to 2003, while the credit derivatives market grew nearly sixteen times over.
	www.celent.com /PressReleases/20040130(2)/CreditDerivatives.htm (384 words)

	Regulators eye possible problems in credit derivatives - Sep. 24, 2005
		Derivatives are investments that derive their value from something else, such as stock options that trade based on the price of an underlying stock.
		Credit derivatives are bought by investors as protection against a possible default on an underlying bond.
		The credit derivatives market overall was worth about $8.4 trillion last year, and has roughly doubled in each of the last three years, according to the International Swaps and Derivatives Association, an industry group.
	money.cnn.com /2005/09/22/markets/credit_derivatives/index.htm (1189 words)

	Ipedo \| Solutions for OTC Derivatives
		The market for swaps and options on interest rates, foreign exchange, commodities, energy and other underlying assets is being driven by the need for risk reduction by enterprises and makes up a significant portion of the earnings of major financial institutions.
		By 2003, the OTC derivatives market was estimated at almost $150 trillion in notional value, and growing at over 25 percent annually.
		With the continued growth of the derivatives market, these issues are only getting worse.
	www.ipedo.com /html/solutions_otc_derivatives.html (525 words)

	Derivatives and the Stock Market
		Strange - because size for size the Stock Market is the size of a mouse and Derivatives are the size of an elephant.
		The size of the derivatives market has become important in roughly only the last ten years.
		This graph of the Derivatives Market is from www.gold-eagle.com who got it from
	www.relfe.com /derivatives.html (276 words)

	Regular OTC Derivatives Market Statistics
		The second part of the Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity and the regular semiannual survey of positions in the global OTC derivatives market share the same format but differ in coverage.
		The first part of the Triennial Central Bank Survey of Foreign Exchange and Derivatives Market Activity was published on 28 September 2004 and covered turnover in traditional foreign exchange markets and OTC currency and interest rate derivatives markets.
		The final results on turnover and amounts outstanding in foreign exchange and OTC derivatives markets will be published in the spring of 2005.
	www.bis.org /publ/otc_hy0412.htm (320 words)

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