The Counter Derivatives : Hedging Or Creating Risk?

9814 Words Sep 3rd, 2016 40 Pages
LA984 Dissertation Research Proposal
Dissertation Topic:
?Over the Counter Derivatives: Hedging or creating risk? Evaluation of EU regulation in an effort to control the risks in OTC Derivatives transactions?

Student ID: 1566306
Word Count: 9. 450


Derivatives are products of financial innovation, the function of which is taking place in the Liberal Economies of the developed and developing world. Especially nowadays, the use of those financial instruments tends to be excessive, as their multifarious functionality can serve institutional investor?s different financial needs. In the financial sector, derivative is defined as a contract whose value is derived from the value of an underlying asset.[footnoteRef:1] Derivatives contracts are agreements between two parties who have a deal upon a specific asset. Derivatives are the most innovative and flexible financial instruments, as their application is addressed to market players who are need to reduce risk, since they provide a means for shifting risk from one party to another that is willing or better able to monitor that risk.[footnoteRef:2] [1: Michael Chui, Derivatives markets, products and participants: an overview, p 1 ] [2: Alan N. Rechtschaffen and Jean Claude Trichet, Capital Markets, Derivatives and the Law: Evolution After Crisis, Derivatives, Alan N. Rechtschaffen, p 2 ]

There are two categories of derivatives. Those that are traded on an exchange and those that are traded…
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