IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/63151.html
   My bibliography  Save this paper

Innovaciones financieras en América Latina: mercados de derivados y determinantes de la administración de riesgo
[Financial Innovations in Latin America: Derivatives markets and Determinants of Risk Management]

Author

Listed:
  • Ibañez, Francisco
  • Romero-Meza, Rafael
  • Coronado-Ramírez, Semei
  • Venegas-Martínez, Francisco

Abstract

This paper is aimed at examining the theoretical determinants and empirical evidence on the use of derivatives in Latin America for risk management. The contingent claims, the development of their market, and their use, is undoubtedly one of the most powerful financial innovations available to individuals and businesses. It is shown that though Latin American firms use derivatives, there is a lack of research to understand its determinants. The causes and incentives for the development of the Chilean derivatives market are investigated, concluding that its development could not take off in exchanges; however, the OTC market has shown a healthy development. Finally, goals and challenges for Latin American countries are stated and potential research ideas to fill the gap on empirical aspects of risk management in these economies are proposed.

Suggested Citation

  • Ibañez, Francisco & Romero-Meza, Rafael & Coronado-Ramírez, Semei & Venegas-Martínez, Francisco, 2015. "Innovaciones financieras en América Latina: mercados de derivados y determinantes de la administración de riesgo [Financial Innovations in Latin America: Derivatives markets and Determinants of Ris," MPRA Paper 63151, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:63151
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/63151/1/MPRA_paper_63151.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Stulz, René M., 1984. "Optimal Hedging Policies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 19(2), pages 127-140, June.
    2. Mian, Shehzad L., 1996. "Evidence on Corporate Hedging Policy," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(3), pages 419-439, September.
    3. Kevin Cowan & Erwin Hansen & Luis Oscar Herrera, 2005. "Currency Mismatches, Balance-Sheet Effects and Hedging in Chilean Non-Financial Corporations," Research Department Publications 4387, Inter-American Development Bank, Research Department.
    4. Robert C. Merton, 2005. "Theory of rational option pricing," World Scientific Book Chapters, in: Sudipto Bhattacharya & George M Constantinides (ed.), Theory Of Valuation, chapter 8, pages 229-288, World Scientific Publishing Co. Pte. Ltd..
    5. Lucjan T. Orlowski, 1995. "Recent Developments in International Currency Derivatives Market: Implications for Poland," CASE Network Studies and Analyses 0055, CASE-Center for Social and Economic Research.
    6. Myers, Stewart C. & Majluf, Nicholas S., 1984. "Corporate financing and investment decisions when firms have information that investors do not have," Journal of Financial Economics, Elsevier, vol. 13(2), pages 187-221, June.
    7. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-470, May.
    8. John R. Graham & Daniel A. Rogers, 2002. "Do Firms Hedge in Response to Tax Incentives?," Journal of Finance, American Finance Association, vol. 57(2), pages 815-839, April.
    9. Myers, Stewart C., 1984. "Capital structure puzzle," Working papers 1548-84., Massachusetts Institute of Technology (MIT), Sloan School of Management.
    10. Tufano, Peter, 1996. "Who Manages Risk? An Empirical Examination of Risk Management Practices in the Gold Mining Industry," Journal of Finance, American Finance Association, vol. 51(4), pages 1097-1137, September.
    11. Myers, Stewart C, 1984. "The Capital Structure Puzzle," Journal of Finance, American Finance Association, vol. 39(3), pages 575-592, July.
    12. Froot, Kenneth A & Scharfstein, David S & Stein, Jeremy C, 1993. "Risk Management: Coordinating Corporate Investment and Financing Policies," Journal of Finance, American Finance Association, vol. 48(5), pages 1629-1658, December.
    13. Stewart C. Myers, 1984. "Capital Structure Puzzle," NBER Working Papers 1393, National Bureau of Economic Research, Inc.
    14. Geczy, Christopher & Minton, Bernadette A & Schrand, Catherine, 1997. "Why Firms Use Currency Derivatives," Journal of Finance, American Finance Association, vol. 52(4), pages 1323-1354, September.
    15. Allayannis, George & Ofek, Eli, 2001. "Exchange rate exposure, hedging, and the use of foreign currency derivatives," Journal of International Money and Finance, Elsevier, vol. 20(2), pages 273-296, April.
    16. Venegas-Martínez, Francisco (ed.), 2008. "Riesgos financieros y económicos, productos derivados y decisiones económicas bajo incertidumbre," Sección de Estudios de Posgrado e Investigación de la Escuela Superios de Economía del Instituto Politécnico Nacional, Escuela Superior de Economía, Instituto Politécnico Nacional, edition 2, volume 1, number 019, July.
    17. Nance, Deana R & Smith, Clifford W, Jr & Smithson, Charles W, 1993. "On the Determinants of Corporate Hedging," Journal of Finance, American Finance Association, vol. 48(1), pages 267-284, March.
    18. Asquith, Paul & Mullins, David Jr., 1986. "Equity issues and offering dilution," Journal of Financial Economics, Elsevier, vol. 15(1-2), pages 61-89.
    19. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
    20. Gerald D. Gay & Jouahn Nam, 1998. "The Underinvestment Problem and Corporate Derivatives Use," Financial Management, Financial Management Association, vol. 27(4), Winter.
    21. Purnanandam, Amiyatosh, 2008. "Financial distress and corporate risk management: Theory and evidence," Journal of Financial Economics, Elsevier, vol. 87(3), pages 706-739, March.
    22. Merton, Robert C., 1995. "Financial innovation and the management and regulation of financial institutions," Journal of Banking & Finance, Elsevier, vol. 19(3-4), pages 461-481, June.
    23. Berlinski, Samuel & Busso, Matias, 2017. "Challenges in educational reform: An experiment on active learning in mathematics," Economics Letters, Elsevier, vol. 156(C), pages 172-175.
    24. Victoria Buscio & Néstor Gandelman & Herman Kamil, 2011. "Exposición Cambiaria y Uso de Instrumentos Derivados en Economías Dolarizadas: Evidencia Microeconómica para Uruguay," Documentos de trabajo 2011005, Banco Central del Uruguay.
    25. G. David Haushalter, 2000. "Financing Policy, Basis Risk, and Corporate Hedging: Evidence from Oil and Gas Producers," Journal of Finance, American Finance Association, vol. 55(1), pages 107-152, February.
    26. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
    27. Söhnke M. Bartram & Gregory W. Brown & Frank R. Fehle, 2009. "International Evidence on Financial Derivatives Usage," Financial Management, Financial Management Association International, vol. 38(1), pages 185-206, March.
    28. Warner, Jerold B, 1977. "Bankruptcy Costs: Some Evidence," Journal of Finance, American Finance Association, vol. 32(2), pages 337-347, May.
    29. Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-654, May-June.
    30. May, Don O, 1995. "Do Managerial Motives Influence Firm Risk Reduction Strategies?," Journal of Finance, American Finance Association, vol. 50(4), pages 1291-1308, September.
    31. Gordon M. Bodnar & Gregory S. Hayt & Richard C. Marston, 1998. "1998 Wharton Survey of Financial Risk Management by US Non-Financial Firms," Financial Management, Financial Management Association, vol. 27(4), Winter.
    32. Smith, Clifford W. & Stulz, René M., 1985. "The Determinants of Firms' Hedging Policies," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 20(4), pages 391-405, December.
    33. Mayers, David & Smith, Clifford W, Jr, 1982. "On the Corporate Demand for Insurance," The Journal of Business, University of Chicago Press, vol. 55(2), pages 281-296, April.
    34. Carlos Budnevich & Salvador Zurita, 2010. "Diagnóstico, Evaluación y Propuesta de Desarrollo del Mercado de Derivados en Chile," Serie de Documentos de Trabajo 06, Superintendencia de Valores y Seguros.
    35. Kenneth A. Froot & David S. Scharfstein & Jeremy C. Stein, 1994. "A Framework For Risk Management," Journal of Applied Corporate Finance, Morgan Stanley, vol. 7(3), pages 22-33, September.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Monda, Barbara & Giorgino, Marco & Modolin, Ileana, 2013. "Rationales for Corporate Risk Management - A Critical Literature Review," MPRA Paper 45420, University Library of Munich, Germany.
    2. Kevin Aretz & Söhnke M. Bartram, 2010. "Corporate Hedging And Shareholder Value," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 33(4), pages 317-371, December.
    3. Söhnke M. Bartram & Gregory W. Brown & Frank R. Fehle, 2009. "International Evidence on Financial Derivatives Usage," Financial Management, Financial Management Association International, vol. 38(1), pages 185-206, March.
    4. Doukas, John A. & Mandal, Sonik, 2018. "CEO risk preferences and hedging decisions: A multiyear analysis," Journal of International Money and Finance, Elsevier, vol. 86(C), pages 131-153.
    5. Huang, Pinghsun & Huang, Hsin-Yi & Zhang, Yan, 2019. "Do firms hedge with foreign currency derivatives for employees?," Journal of Financial Economics, Elsevier, vol. 133(2), pages 418-440.
    6. Oliver Russ & Günther Gebhardt, 2005. "Erklärungsfaktoren für den Einsatz von Währungsderivaten bei deutschen Unternehmen — eine empirische Logit-Analyse," Schmalenbach Journal of Business Research, Springer, vol. 57(7), pages 565-594, November.
    7. Markus Hang & Jerome Geyer‐Klingeberg & Andreas W. Rathgeber & Stefan Stöckl, 2021. "Rather complements than substitutes: Firm value effects of capital structure and financial hedging decisions," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(4), pages 4895-4917, October.
    8. Alexandridis, George & Chen, Zhong & Zeng, Yeqin, 2021. "Financial hedging and corporate investment," Journal of Corporate Finance, Elsevier, vol. 67(C).
    9. Bartram, Söhnke M., 2004. "The Use of Options in Corporate Risk Management," MPRA Paper 6663, University Library of Munich, Germany.
    10. Danijela Milos Sprcic, 2013. "Corporate Risk Management And Value Creation," Montenegrin Journal of Economics, Economic Laboratory for Transition Research (ELIT), vol. 9(2), pages 17-26.
    11. Mohamed Mnasri & Georges Dionne & Jean-Pierre Gueyie, 2013. "The Maturity Structure of Corporate Hedging: the Case of the U.S. Oil and Gas Industry," Cahiers de recherche 1337, CIRPEE.
    12. Jerome Geyer-Klingeberg & Markus Hang & Andreas W. Rathgeber & Stefan Stöckl & Matthias Walter, 2018. "What do we really know about corporate hedging? A meta-analytical study," Business Research, Springer;German Academic Association for Business Research, vol. 11(1), pages 1-31, February.
    13. Fauver, Larry & Naranjo, Andy, 2010. "Derivative usage and firm value: The influence of agency costs and monitoring problems," Journal of Corporate Finance, Elsevier, vol. 16(5), pages 719-735, December.
    14. Arnold, Matthias M. & Rathgeber, Andreas W. & Stöckl, Stefan, 2014. "Determinants of corporate hedging: A (statistical) meta-analysis," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(4), pages 443-458.
    15. Bartram, Söhnke M., 2019. "Corporate hedging and speculation with derivatives," Journal of Corporate Finance, Elsevier, vol. 57(C), pages 9-34.
    16. Constantin Mellios, 2003. "La gestion des risques financiers par les entreprises : explications théoriques versus études empiriques," Revue d'Économie Financière, Programme National Persée, vol. 72(3), pages 243-264.
    17. Gay, Gerald D. & Lin, Chen-Miao & Smith, Stephen D., 2011. "Corporate derivatives use and the cost of equity," Journal of Banking & Finance, Elsevier, vol. 35(6), pages 1491-1506, June.
    18. Gunratan Lonare & Ahmet Nart & Ahmet M. Tuncez, 2022. "Industry tournament incentives and corporate hedging policies," Financial Management, Financial Management Association International, vol. 51(2), pages 399-453, June.
    19. Nicola Benatti & Francesco Napolitano, 2019. "An insight into the derivatives trading of firms in the euro area," IFC Bulletins chapters, in: Bank for International Settlements (ed.), Are post-crisis statistical initiatives completed?, volume 49, Bank for International Settlements.
    20. Danijela Miloš Sprčić & Metka Tekavčič & Željko Šević, 2008. "A Review of the Rationales for Corporate Risk Management: Fashion or the Need?," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 1(1), pages 71-99, April.

    More about this item

    Keywords

    Financial innovations derivatives; risk management; Latin America.;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:63151. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.