INFLUENCE OF FINANCIAL DERIVATIVES ON THE CAPITAL MARKET OF MAJOR EUROPEAN EXCHANGES

Authors

Keywords
financial derivatives, options, futures, exchange turnover, open positions, market liquidity, risky, precautionary behaviour

Summary
There are still opinions in professional circles about the danger of financial derivatives and their blame for the current crisis. At the same time there are isolated studies regarding the specific effects of derivatives and they have a narrow focus – a separate tool, limited market and time. The current study looks for arguments about the actual influence of financial derivatives on the capital market in terms of studying the biggest West European exchanges with options and futures based on their instruments. An analysis is made of the most fundamental market indicators: exchange turnovers – in a premium value and number of contracts, open positions, movement of indexes, volatility, etc. The results of the correlative, comparative and traditional investment analyses lead to the fundamental findings: derivative trading improves market liquidity of the basic capital instruments and aids their risky management, the activity of derivative exchanges is more stable in years of crisis than that of the stock exchanges, which indicates a better risk-return correlation; an analogous analysis of the Russian markets for the same period corroborates some findings and shows some interesting differences in investment behaviour. In terms of methodology the parallel analysis between main indicators such as: exchange volumes, option rate and open positions enable the indication of fundamental changes in investment behaviour and of occurring financial and economic cataclysms.

JEL: G14, G01
Pages: 21
Price: 3 Points

More titles

  • RESEARCHING VARIATIONS IN THE MARKET TREND BY USING INDICATORS FOR TECHNICAL ANALYSIS

    Technical analysis is one of the two approaches used for investment analysis of financial markets. It comprises diverse graphical and quantitative tools, which are applied in researching the price deviation of financial instruments. This research paper focuses on the indicators that are applied to forecast short-term price variations of financial ...

  • TRENDS IN THE DEVELOPMENT OF PROFITABILITY AND RISK PROFILE OF THE BANKING SECTOR IN OUR COUNTRY

    This paper discusses the impact of the financial crisis on the profitability and risk profile of the banking sector in our country. The problem is studied at two levels – at a macroeconomic level (the banking system as a whole) and at a microeconomic level (particular banks). An indicator is derived for a complex binding of profit and risk ...

  • ON EVOLUTION AND THE NEW CHALLENGES FACING BANK MARKETING IN THE AFTERMATH OF THE FINANCIAL CRISIS

    In times of a global financial and economic crisis and global banking collapse, effective bank marketing will be the key factor for successful stabilization of the ban-king system. The dynamic and volatile banking trends require a thorough reorganization of the concepts for strategic marketing planning and forecasting regarding customers, partners ...