The Research on the Risk Disclosure of the OTC derivatives in Taiwan

• Main Authors: Chi-Hui Hsu, 許智惠
• Other Authors: Bo-ywe Lee
• Format: Others
• Language: zh-TW
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/34081772401899471389

碩士 === 國立成功大學 === 政治經濟學研究所 === 94 === 　When the Federal Reserve Banks and the LIBOR lowered the interest rate in 2002, profits from traditional banking investments reduced. Therefore, to make the financial market in Taiwan more efficient and to allow more choice, the sale of derivatives in Taiwan was introduced in July, 2003. Derivatives provide another form of investment to investors who seek a rate of return that is higher than a term deposit. What should the investors do before they purchase derivatives, as investment in derivatives is not without risk. Therefore, it is important that investors be fully aware of how derivatives operate in the financial market and how such investments are structured. 　The purpose of this research was to determine if the level of information disclosure for derivatives in Taiwan was adequate. After reviewing products marketed by 14 Taiwanese financial institutions, I concluded that there was a problem not only with inadequate disclosure but also with the sales tactics used by professional managers in the sale of derivative products. Professional managers tended to overstate the benefits and the returns expected from the products. Some managers misrepresented the total interest payable over the investment period by stating that the each yearly percentage rate was added together to give the overall return over the total investment period. Other managers did not fully disclose the level of risk, which can result in investors misunderstanding the risks and committing more funds than they normally would to the purchase of a speculative investment. The concept of “informed choice”, whereby an investor understands the nature of the investment contract, risk profile, cost of investment and potential returns, was largely absent. 　My research concluded that there is a need for an investment standard to regulate the selling of derivatives. Investors must receive a high level of disclosure from fund managers about derivative products so they can make informed investment decisions. A solution to the lack of full risk and information disclosure could be achieved through government regulation, or through the formulation of a mandatory industry code of practice agreed between financial institutions marketing derivatives.