DEBT INSTRUMENTS AND THEIR RISK IN THE CONTEXT OF GLOBAL FINANCIAL CRISIS

Lina Sineviciene, Asta Vasiliauskaite

Abstract


Credit derivatives play important role in financial markets, but they are considered quite controversial and their effects on the stability of financial markets aren’t complexity examined yet. So the aim of this paper is to explore the risks of credit derivatives in the context of global financial crisis. Object of the research– credit derivatives and their risks. Methods of the research: systematic analysis of scientific literature, logical comparative analysis and generalization methods.

The main conclusions are presented:

Global financial crisis of 2007 – 2008 years has disclosed problems and risks of credit derivatives and what broad impact would be on the financial system stability in the case of incautious use of them. Credit derivatives became one of the crisis causes, while they had to hedge of credit risk and to diversify it. Due to globalization and integration of financial markets financial crisis originated in the USA has grown into global financial crisis. Consisting problems in credit derivatives markets should be solved by implementing special package of tools. They should cover these areas: regulation of credit derivatives markets, standardization of financial instruments, reconsideration of credit ratings mechanism and methodology, and also development of market infrastructure.


Keywords


financial crisis; credit crises; debt instrument; risk.

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Print ISSN: 1822-6515
Online ISSN: 2029-9338