the uses and risks of derivativestment firm

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1、CHAPTER31THEUSESANDRISKSOFDERIVATIVES∗JoanneM.HillDerivativeproductsofferameansofimprovingperformance,controllingrisk,andincreasingflexibility.Theuseofderivativesalsointroducesrisks,however,andthoseriskshavebeenincreasedbytheglobalizationoffinancialmarketsandthes

2、peedandcomplexitybroughtbytechnologicaladvances.Choiceamongthevariousderivativeinstrumentsandstrategiesrequirescarefulconsiderationofthebenefitsanddrawbacksofeachinstrument.Riskmanagementrequiresscenarioanalysisforexistingstrategiesandinternalrisk-controlprocess

3、es.Sincetheirinception,derivativesecuritieshavealwaysbeencontroversial,andanyoneinvolvedinderivativeresearchcanexpecttobeonthedefensive.Thispresentationprovidesadefinitionofderivativesecurities,followedbythehistoryoftheiruseandadiscussionofwhytheyarereceivinginc

4、reasedattentiontoday.Thepresentationthenfocusesonwhyderivativesshouldbeconsideredreturn-enhancementandrisk-managementtoolsandlooksatwaysinwhichequityderivativesarebeingappliedininternationalinvesting.Thepresentationcloseswithadiscussionoftherisksincurredinderiv

5、ativesuseandsuggestssomewaystomanagethisriskinternally.1DERIVATIVESDerivativesecuritiesallowinvestorstomatchasetofsecuritiesorportfoliostoasetofriskandreturnopportunities.Inotherwords,byusingderivatives,investorscantransformtherisk–returnprofilesofexistingportfo

6、liostomatchtheirdesiredrisk–returnprofiles.Many∗ReprintedfromAIMRConferenceProceedings:InvestingWorldwideVI(January1996):46–58.459CH031.indd4598/28/108:40:16PM460PartIII:ManagingRisk—Derivativesofthesetransformationsarestandardandcarriedoutbynumerousinvestors,wh

7、ichhasledtothecreationofbasic,standardized,exchange-tradedoptionsandindexfutures.Othertransformationsareunique—perhapsforaninvestorwhohasanaccountingissueoracapitalconstraintthatrequirescustomizedderivatives.Derivativesecuritiescanbeboughtorsold,andcounterparti

8、escanbeanexchangeclearinghouseor,inthecaseofcustomizedcontracts,otherfinancialmarketparticipants.Derivativescanbedefinedastradablecontractsthatprovideapayoffcontingentonthepri