A Survey of Emerging Derivatives Markets

Donald Lien and Mei Zhang

Emerging Markets Finance and Trade, 2008, vol. 44, issue 2, 39-69

Abstract: This paper summarizes theoretical and empirical research on the roles and functions of emerging derivatives markets and the resulting implications on policy and regulations. Previous studies revealed that commodity derivatives markets offered an effective and welfare-improving method to deal with price volatility. Financial derivatives markets have helped to support capital inflows into emerging market economies. On the other hand, the use of financial derivatives has led to exacerbated volatility and accelerated capital outflow. There is a consensus that derivatives are seldom the cause of a financial crisis but they could amplify the negative effects of the crisis and accelerate contagion. Previous studies of derivatives markets have supported the hedging role of emerging derivatives markets. Empirical results from a few emerging countries suggest a price discovery function of emerging futures markets. The findings on the price stabilization function of emerging derivatives markets are mixed. Finally, recent research has documented that constructive development of derivatives markets in emerging market economies needs to be supported by sound macroeconomic fundamentals as well as updated financial policies and regulations.

Keywords: commodity derivatives; emerging markets; financial derivatives; hedging; price discovery; price stabilization (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
http://mesharpe.metapress.com/link.asp?target=contribution&id=M682653L54Q24P65 (text/html)
Access to full text is restricted to subscribers.

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:mes:emfitr:v:44:y:2008:i:2:p:39-69

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().