NIGERIAN STOCK EXCHANGE DERIVATIVES MARKET COMING
The Nigerian stock exchange will this year launch the derivatives segment of its market, according to its 1st Vice President, Mr Abimbola Ogunbanjo, this is an attempt to key into the fast growing derivatives market world wide
Speaking during the opening ceremonies of the on going NSE X Academy first training programme yesterday at the Civic Centre, Victoria Island, he said that was why the training session became necessary and timely.
However, he drew attention to divergent perspectives on the derivatives market saying " To some, derivatives are simple tools that allow market participants to efficiently manage their risks, to others derivatives are weapons that allow market participants thwart regulations; exceed risk limits, and threaten the very fabric of the world's economic system"
He added: " As with any other tool, the answer as to whether the tool is good or bad is determined by the way it is used and who is using it."
The training started yesterday June 12 and will last till June 15. It is focussed on the legal and risks aspects of derivatives and clearing central counter party transactions". It is the first training by NSE' X academy.
Derivatives are financial contracts that obtain their value from an underlining asset. Under it the buyer agrees to buy the asset on a particular date and at a specific price.
It comes in various forms but principally it allows the seller to have some money now and agree to really sell at the stated price and time in future.
Through it, for example, a manufacturer could hedge against raw materials or input price increases by opting for a derivative deal now or someone in need of fluctuating foreign currency can reduce his price related risk.
In the oil business producers use it too to guarantee market in future irrespective of ruling price or demand and supply situation
There are risks though and they have to do with the contract not having its own intrinsic value, this is dependent on the price of the underlying asset.
There is also the risk that it is actually a gamble since future prices are guess works and actual could disappoint. Then there are also reported cases of fraud.
Most recent estimates by Kimberly Amadeo quoting various sources like The New York Times, and BISS, about 25bn derivatives were traded in 2016 with Asia ( that includes China and India) accounting for 36%; North America 34%; and Europe 24%. The total worth was estimated at $570tr.
Speaking during the opening ceremonies of the on going NSE X Academy first training programme yesterday at the Civic Centre, Victoria Island, he said that was why the training session became necessary and timely.
However, he drew attention to divergent perspectives on the derivatives market saying " To some, derivatives are simple tools that allow market participants to efficiently manage their risks, to others derivatives are weapons that allow market participants thwart regulations; exceed risk limits, and threaten the very fabric of the world's economic system"
He added: " As with any other tool, the answer as to whether the tool is good or bad is determined by the way it is used and who is using it."
The training started yesterday June 12 and will last till June 15. It is focussed on the legal and risks aspects of derivatives and clearing central counter party transactions". It is the first training by NSE' X academy.
Derivatives are financial contracts that obtain their value from an underlining asset. Under it the buyer agrees to buy the asset on a particular date and at a specific price.
It comes in various forms but principally it allows the seller to have some money now and agree to really sell at the stated price and time in future.
Through it, for example, a manufacturer could hedge against raw materials or input price increases by opting for a derivative deal now or someone in need of fluctuating foreign currency can reduce his price related risk.
In the oil business producers use it too to guarantee market in future irrespective of ruling price or demand and supply situation
There are risks though and they have to do with the contract not having its own intrinsic value, this is dependent on the price of the underlying asset.
There is also the risk that it is actually a gamble since future prices are guess works and actual could disappoint. Then there are also reported cases of fraud.
Most recent estimates by Kimberly Amadeo quoting various sources like The New York Times, and BISS, about 25bn derivatives were traded in 2016 with Asia ( that includes China and India) accounting for 36%; North America 34%; and Europe 24%. The total worth was estimated at $570tr.
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