Derivatives in an emerging market: a study of Thailand

Abstract

The volatility of interest rate, currency, stock and bond returns and commodity prices have led firms and financial institutions to implement hedging techniques to manage their financial risks. Financial derivatives are essential in designing an effective hedging strategy. They also represent an important source of revenues for financial institutions and speculators. This has led to an explosive growth in the trading of derivative securities and they represent trillions of dollars of transactions. Futures and option are now actively traded in many different exchanges. Many other derivative contracts are traded on the over-the-counter market. The globalisation of financial markets has enabled developing countries to get an experience on the utilisation of these techniques.