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Derivatives, the Shape of International Capital Flows and the Virtues of Prudential Regulation

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  • Randall Dodd

Abstract

The paper studies the trend towards the use of securities as a vehicle to transfer capital to developing economies, and how it is linked to the increasing use of derivatives transactions in developing countries. It also provides a descriptive analysis of how each type of capital vehicle is associated with various derivatives instruments. It then looks at how various derivative instruments decompose the risks associated with each capital vehicle, price then separately and then allow those risks to be redistributed.

Suggested Citation

  • Randall Dodd, 2002. "Derivatives, the Shape of International Capital Flows and the Virtues of Prudential Regulation," WIDER Working Paper Series DP2002-93, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:dp2002-93
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    File URL: https://www.wider.unu.edu/sites/default/files/dp2002-93.pdf
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    References listed on IDEAS

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    1. Salih N. Neftci, 1998. "FX Short Positions, Balance Sheets and Financial Turbulence: An Interpretation of the Asian Financial Crisis," SCEPA working paper series. 1998-18, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    2. Peter M. Garber, 1998. "Derivatives in International Capital Flows," NBER Working Papers 6623, National Bureau of Economic Research, Inc.
    3. Eatwell, John & Taylor, Lance (ed.), 2002. "International Capital Markets: Systems in Transition," OUP Catalogue, Oxford University Press, number 9780195154986.
    4. Peter M. Garber & Subir Lall, 1996. "Derivative products in exchange rate crises," Proceedings, Federal Reserve Bank of San Francisco, pages 206-231.
    5. Mr. Subir Lall, 1997. "Speculative Attacks, Forward Market Intervention and the Classic Bear Squeeze," IMF Working Papers 1997/164, International Monetary Fund.
    6. World Bank, 2001. "World Development Report 2000/2001," World Bank Publications - Books, The World Bank Group, number 11856, December.
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    Cited by:

    1. Andreas Röthig & Willi Semmler & Peter Flaschel, 2009. "Corporate Currency Hedging and Currency Crises," Chapters, in: Andreas Pyka & Uwe Cantner & Alfred Greiner & Thomas Kuhn (ed.), Recent Advances in Neo-Schumpeterian Economics, chapter 7, Edward Elgar Publishing.
    2. Röthig, Andreas, 2004. "Currency futures and currency crises," Publications of Darmstadt Technical University, Institute for Business Studies (BWL) 4022, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL).
    3. Ilene GRABEL, 2004. "Trip Wires And Speed Bumps: Managing Financial Risks And Reducing The Potential For Financial Crises In Developing Economies," G-24 Discussion Papers 33, United Nations Conference on Trade and Development.
    4. Röthig, Andreas, 2004. "Currency Futures and Currency Crises," Darmstadt Discussion Papers in Economics 136, Darmstadt University of Technology, Department of Law and Economics.
    5. Gerald Epstein, 2009. "Should Financial Flows Be Regulated? Yes," Working Papers 77, United Nations, Department of Economics and Social Affairs.
    6. Andreas Pyka & Uwe Cantner & Alfred Greiner & Thomas Kuhn (ed.), 2009. "Recent Advances in Neo-Schumpeterian Economics," Books, Edward Elgar Publishing, number 12982.
    7. Andreas Röthig, 2009. "Microeconomic Risk Management and Macroeconomic Stability," Lecture Notes in Economics and Mathematical Systems, Springer, number 978-3-642-01565-6, December.

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