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The Asian Financial Crisis: The Role of Derivative Securities Trading and Foreign Investors

Author

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  • Eric Ghysels
  • Junghoon Seon

Abstract

This paper is part of a larger research program pertaining to the role of derivatives during financial crisis and also part of the research pertaining to the causes of the Asian financial crisis. The Korean market is studied because of two reasons: (1) it is a representative example of the Asian financial meltdown and (2) there is a detailed data set available of all transactions by different types of protagonists, including foreign investors. The paper begins with establishing first the role of derivatives securities during the crisis. Once the role of futures contracts is understood, the paper examines whether derivatives trading by either domestic or non-resident investors, or both together, exerted a destabilizing influence during the crash. Nous étudions la crise financière asiatique et en particulier le marché coréen. Contrairement aux études précédentes, nous analysons le rôle des titres dérivés durant la crise et en particulier les transactions par des investisseurs étrangers. Nous démontrons l'impact négatif sur le marché causé par l'intervention de ces investisseurs.

Suggested Citation

  • Eric Ghysels & Junghoon Seon, 2000. "The Asian Financial Crisis: The Role of Derivative Securities Trading and Foreign Investors," CIRANO Working Papers 2000s-11, CIRANO.
  • Handle: RePEc:cir:cirwor:2000s-11
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    File URL: http://www.cirano.qc.ca/files/publications/2000s-11.pdf
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Sornette, Didier & Zhou, Wei-Xing, 2004. "Evidence of fueling of the 2000 new economy bubble by foreign capital inflow: implications for the future of the US economy and its stock market," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 332(C), pages 412-440.
    2. D. Sornette & W. -X. Zhou, 2003. "Evidence of Fueling of the 2000 New Economy Bubble by Foreign Capital Inflow: Implications for the Future of the US Economy and its Stock Market," Papers cond-mat/0306496, arXiv.org.
    3. Röthig, Andreas, 2004. "Currency Futures and Currency Crises," Darmstadt Discussion Papers in Economics 136, Darmstadt University of Technology, Department of Law and Economics.

    More about this item

    Keywords

    Herding; feedback trading; futures; Crise financière; titres dérivés;

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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