Risk Factors in Derivatives Markets

Raimonda Martinkutė-Kaulienė ()
Additional contact information
Raimonda Martinkutė-Kaulienė: Vilnius Gediminas Technical University

Entrepreneurial Business and Economics Review, 2014, vol. 2, issue 4, 71-83

Abstract: The objective of the article is to analyse and present the classification of risks actual to derivative securities. The analysis is based on classical and modern literature findings and analysis of newest statistical data. Despite their purpose to hedge from risks, derivative contracts are risky as every financial activity in the market. The analysis led to the conclusion, that the main risks typical for derivatives contracts and their traders are market risk, liquidity risk, credit and counterparty risk, legal risk and transactions risk. Pricing risk and systemic risk is also quite important. The analysis showed that market risk is the most important kind of risk that in many situations influences the level of remaining risks. Market risk occurs when the investor misjudges the market direction, counterparty risk occurs when misjudgement refers to the business partner. Some risks exist despite the employment of derivatives. It was suggested that risk of derivative contracts can be related with the following factors: main characteristics of contracts; trading conditions; position assumed in the contract; complexity of the contract. The originality of this work lies in studying various aspects of risk factors influencing the risks of derivative securities and suggested classification of these factors.

Keywords: risk; factor; derivative security; option contract; forward; future contract; swap (search for similar items in EconPapers)
JEL-codes: G10 G23 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://eber.uek.krakow.pl/index.php/eber/article/download/62/pdf_5 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:krk:eberjl:v:2:y:2014:i:4:p:71-83

Ordering information: This journal article can be ordered from

Access Statistics for this article

Entrepreneurial Business and Economics Review is currently edited by Krzysztof Wach, PhD, hab.

More articles in Entrepreneurial Business and Economics Review from Centre for Strategic and International Entrepreneurship at the Cracow University of Economics. EBER Journal Cracow University of Economics Faculty of Economics and International Relations Centre for Strategic and International Entrepreneurship ul. Rakowicka 27 31-510 Krakow Poland. Contact information at EDIRC.
Bibliographic data for series maintained by Piotr Stanek, PhD. ().