Business Times

Derivatives anideal product in post-war economy

Derivatives are an ideal stock market instrument to manage portfolio in the post-war economy in Sri Lanka, according to an expert. “Derivatives are a good way to manage stock market risk, because in equity (shares) the investors diversify their portfolios, but they cannot minimize the risk satisfactorily with this kind of equity.

Derivatives are different, in that since they are contracts, a certain risk averse person can pass on that risk in their portfolio to another who might want to take on that chance,” Dr Hareendra Dissa Bandara, Director Financial Services Academy (FSA), the training arm of the Securities and Exchange Commission (SEC) told the Business Times on the sidelines of the regional conference on derivatives on Friday.

The 3-day conference organised by the FSA which concluded on Friday saw some of the industry’s best from India discussing exchange traded funds, securitization, products and pricing in forwards and futures, how market intermediaries use futures such as hedging and arbitrage strategies, investigation and enforcement practices pertaining to derivatives and clearing, Settlement and risk management in derivatives.

Dr Dissa Bandara said that this conference was the first step in creating awareness and educating the stock market professionals in derivatives. “Since the local market is similar (in thinking patterns, etc) in some characteristics to the Indian market we sought expertise for this seminar from the Indian experts. Also we invited some Pakistani experts for the same reason,” he said.

He said last year the SEC facilitated derivatives through the SEC Act and now the onus is on the brokering community to take it up and be creative.

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