Derivatives are increasingly being used in financial markets throughout the world, and emerging markets (EM) are no exceptions. Even though the development stage of the corporate derivatives market in EM still falls short of that in advanced economies, it has steadily grown into a reasonably active market over the last decade. EM corporates mainly use hedging operations to reduce their exchange rate exposure and therefore limit volatility until the real transaction takes place. The purpose of this seminar is to examine the use of derivatives by corporates and its implications for financial stability in EM economies.
• Basics of derivatives: Pricing and risk management
• Derivatives markets in the emerging economies products and players
• Factors affecting firms' decision to use foreign exchange derivative instruments
• Corporate borrowers of foreign currency debt and financial stability issues for EM economies
• Case study 1: Hedging requirements for corporates- Indonesia versus India
• Case study 2: Basic and complex corporate derivatives- Methodologies for measuring risks exposed by derivatives
• Case study 3: Emerging market central banks' uses of derivatives- Non-deliverable forwards, FX swaps and options
Target Audience: The seminar is tailored for central bankers who are interested in understanding the use of derivatives and its implications
for financial stability in emerging market economies. The lectures will consist of introducing the basics of derivatives and analyzing emerging market derivatives practices and their financial stability implications via most relevant case studies. Prior knowledge of intermediate financial market instruments is essential.