| Summary: | Includes bibliographical references. === Derivatives have a long history which could be traced as far as in the biblical times, around 1700 B.C when Jacob was granted the right to marry Laban’s daughter, in counterparty of seven years of work, an agreement often presented as one of the first option contract in the human history. However, the use of derivatives really expanded over the last three decades. According to the Bank of International Settlement (BIS), the outstanding notional amount of the global over-the-counter (OTC) derivative market reached USD 708 trillion in June 2011. Derivative markets have a significant role to play in the development of African financial markets. Indeed, through the mechanisms of price discovery and risk transfer; derivative instruments introduce greater market efficiency and provide market participants the opportunity to hedge their exposure to various financial risks. The development of a derivative strong market in Africa presents a compelling case given the nature of several African economies, predominantly composed of primary commodity producers, open small economies inherently vulnerable to commodity price, foreign exchange volatility, and interest rate risks.
|
|---|
