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Hedging in derivatives markets: the experience of Chile

Author

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  • Fernando Avalos
  • Ramon Moreno

Abstract

Prior to the onset of the 2008 financial crisis, domestic FX derivatives markets in Chile had gained depth and liquidity, boosted by the growing hedging needs of private pension funds. During the crisis, Chile suffered significantly less stress than other EMEs, within Latin America and outside. We present evidence suggesting that this was related to the liquidity and resilience of its FX derivatives markets.

Suggested Citation

  • Fernando Avalos & Ramon Moreno, 2013. "Hedging in derivatives markets: the experience of Chile," BIS Quarterly Review, Bank for International Settlements, March.
    • Handle: RePEc:bis:bisqtr:1303g
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    References listed on IDEAS

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    1. José Eduardo Gómez-González & Carlos Eduardo León Rincón & Karen Juliet Gómez-González, 2012. "Does the Use of Foreign Currency Derivatives Affect Firms' Market Value? Evidence from Colombia," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(4), pages 50-66, July.
    2. Allayannis, George*Brown, Gregory W.*Klapper,Leo, 2001. "Exchange rate risk management : evidence from East Asia," Policy Research Working Paper Series 2606, The World Bank.
    3. Valeria Orellana & Paulina Rodriguez, 2009. "Methodology for measuring derivatives at the Central Bank of Chile," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Proceedings of the IFC Conference on "Measuring financial innovation and its impact", Basel, 26-27 August 2008, volume 31, pages 165-180, Bank for International Settlements.
    4. Alejandro Jara & Ramon Moreno & Camilo E Tovar, 2009. "The global crisis and Latin America: financial impact and policy responses," BIS Quarterly Review, Bank for International Settlements, June.
    5. Naohiko Baba & Ilhyock Shim, 2010. "Policy responses to dislocations in the FX swap market: the experience of Korea," BIS Quarterly Review, Bank for International Settlements, June.
    6. Dubravko Mihaljek & Frank Packer, 2010. "Derivatives in emerging markets," BIS Quarterly Review, Bank for International Settlements, December.
    7. Kevin Cowan & Carla Valdivia, 2011. "Issues in cross-border funding of chilean banks," BIS Papers chapters, in: Bank for International Settlements (ed.), Capital flows, commodity price movements and foreign exchange intervention, volume 57, pages 111-121, Bank for International Settlements.
    8. Coutinho, João Ricardo Ribeiro & Sheng, Hsia Hua & Lora, Mayra Ivanoff, 2012. "The use of Fx derivatives and the cost of capital: Evidence of Brazilian companies," Emerging Markets Review, Elsevier, vol. 13(4), pages 411-423.
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    Cited by:

    1. Bank for International Settlements, 2017. "Foreign exchange liquidity in the Americas," BIS Papers, Bank for International Settlements, number 90.
    2. Bernardus F Nazar Van Doornik & Jon Frost & Rafael Guerra & Alexandre Tombini & Christian Upper, 2024. "Towards liquid and resilient government debt markets in EMEs," BIS Quarterly Review, Bank for International Settlements, March.
    3. Christian Upper & Marcos Valli, 2016. "Emerging derivatives markets?," BIS Quarterly Review, Bank for International Settlements, December.
    4. Faruk Miguel Liriano, 2017. "The use of foreign exchange derivatives by exporters and importers: the Chilean experience," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Statistical implications of the new financial landscape, volume 43, Bank for International Settlements.
    5. Mr. Fabio Comelli & Mrs. Esther Perez Ruiz, 2016. "To Bet or Not to Bet: Copper Price Uncertainty and Investment in Chile," IMF Working Papers 2016/218, International Monetary Fund.
    6. Masazumi Hattori & Elod Takáts, 2015. "The role of debt securities markets," BIS Papers chapters, in: Bank for International Settlements (ed.), What do new forms of finance mean for EM central banks?, volume 83, pages 41-64, Bank for International Settlements.

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    More about this item

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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