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Interest rate derivatives in developing countries in Europe

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Author(s): Slobodan Cerovic | Marina Pepic

Journal: Perspectives of Innovations, Economics and Business
ISSN 1804-0519

Volume: 9;
Issue: 3;
Start page: 38;
Date: 2011;
Original page

Keywords: Interest rate derivatives | developing countries | government yield curve | stabile macroeconomic environment

ABSTRACT
Financial derivatives (interest rate futures, options and swaps) are a very simple way to minimize interest rate risk and therefore are extremely popular. The value of interest rate derivatives transactions in the world is increasing dramatically. Unfortunately, this is not the case with developing countries in Europe. Although significantly increased in the last decade, interest rate derivatives markets in developing countries are still in nascent stage. In most developing countries still the main problem for the interest rate derivatives development is the lack of basic conditions, including inadequate measurement of interest rate risk exposure, underdevelopment of financial markets in general and especially of market instruments that underlying derivatives, weak and/or inadequate infrastructure and legal framework, misunderstanding and lack of experience in operations with financial derivatives and the complexity of the derivatives accounting.

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