THE IMPACT OF DERIVATIVE INSTRUMENTS ON GLOBAL FINANCIAL MARKET STABILITY
Keywords:
Derivatives, Financial Stability, Risk Management, Systemic Risk, Futures, Options, Swaps, Financial Crisis, Regulation.Abstract
Derivative instruments have become indispensable components of the global financial system, providing mechanisms for hedging, price discovery, and efficient capital allocation. However, their rapid growth and complex structures have also raised concerns about market volatility and systemic risk. This paper examines how derivatives influence global financial market stability through both stabilizing and destabilizing channels. Drawing on evidence from major financial crises, empirical studies, and regulatory reforms, the study concludes that derivatives can enhance stability when used prudently but pose systemic threats when leveraged excessively or without transparency.
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