Legal Nature and Role of Swap Arrangements and Options as Financial Instruments

Petrović Ružica (), Kerković Tamara Milenković () and Jocić Dragana Radenković ()
Additional contact information
Petrović Ružica: MSc student at University of Niš, Faculty of Law, Republic of Serbia
Kerković Tamara Milenković: University of Niš, Faculty of Economics, Republic of Serbia
Jocić Dragana Radenković: University of Niš, Faculty of Economics, Republic of Serbia

Economic Themes, 2019, vol. 57, issue 4, 459-480

Abstract: Financial derivatives are, in the last forty years, the most important financial innovation that influence the creation of new, very deep and broad financial markets. Their number is constantly increasing. There is a creation of new variants of existing derivative contracts and therefore the subjects have the opportunity to differently manage risk. Although their controversial legal nature, generally accepted view is that they were contracts. Swap is the youngest of all financial derivatives and represents a financial innovation of a later date. Market swaps recorded one of the fastest growth rate among global financial markets. Swap represents a private agreement between the two parties regarding exchange cash flow of the fixed time in the future in accordance with a predetermined pattern. The most common users of swaps are non-financial corporations, which want to receive variable, and to pay a fixed interest rate in order to limit interest expenses on bank loans or bond issues with variable interest rate, as well as banks, the governments of some supranational institutions such as the World Bank. In economic theory emphasized is the view that the comparative advantage is the basis for swaps functioning. Options are contracts in which one party has the exclusive right, while the other contracting party assumes only the obligation to buy or sell assets to which the option is created. In the nationa legislation the option contract is transferable standardized contract binding the buyer has the right to, including the payment obligation of the agreed premium on the day or days of maturity specified in the contract.

Keywords: contract; financial derivatives; swaps; options; cash flow (search for similar items in EconPapers)
JEL-codes: D53 E44 K22 (search for similar items in EconPapers)
Date: 2019
References: View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.2478/ethemes-2019-0026 (text/html)

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:vrs:ecothe:v:57:y:2019:i:4:p:459-480:n:4

DOI: 10.2478/ethemes-2019-0026

Access Statistics for this article

Economic Themes is currently edited by Marija Radosavljević

More articles in Economic Themes from Sciendo
Bibliographic data for series maintained by Peter Golla ().