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A Review on the Potentiality of Derivative Market and Economic Stability of Bangladesh

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  • Md. Edrich Molla

Abstract

This study uncovers the different prospects of derivative market in Bangladesh. Economic stability can be achieved through derivative market in Bangladesh. Due to instable economic conditions and restricted environment, corporate sector has reflected insignificant contribution in equity or bond markets in Bangladesh. Rapid infrastructure development, political stability, effective governance, experience and awareness of market participants are the key factors that may lead to build a strong derivative market in Bangladesh. Hence, literature is reviewed and analyzed due to unavailability of appropriate data for this study. Findings of the study have suggested that derivatives are an effective risk mitigating tool on one hand whereas on the other side, highly speculative activities in derivative market may be harmful for the financial markets and economic growth. In Bangladesh perspective, all the players of financial market will have to adopt adequate risk mitigating strategies to avoid any adverse market scenario. Speculative activities must be highly restricted due to economic instability as Bangladesh is not in a position to absorb any financial shocks or crisis. The main regulatory authority of this particular market will be Bangladesh Bank (BB) and Bangladesh Security and Exchange Commission (BSEC) though this kind of market is not introduced yet in Bangladesh. The regulators will keenly observe market and take necessary actions to prevent any adverse conditions.

Suggested Citation

  • Md. Edrich Molla, 2018. "A Review on the Potentiality of Derivative Market and Economic Stability of Bangladesh," International Journal of Science and Business, IJSAB International, vol. 2(4), pages 632-639.
    • Handle: RePEc:aif:journl:v:2:y:2018:i:4:p:632-639
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    References listed on IDEAS

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    1. Bekaert, Geert & Harvey, Campbell R. & Lumsdaine, Robin L., 2002. "Dating the integration of world equity markets," Journal of Financial Economics, Elsevier, vol. 65(2), pages 203-247, August.
    2. Keith Sill, 1997. "The economic benefits and risks of derivative securities," Business Review, Federal Reserve Bank of Philadelphia, issue Jan, pages 15-26.
    3. Refet Gürkaynak & Justin Wolfers, 2005. "Macroeconomic Derivatives: An Initial Analysis of Market-Based Macro Forecasts, Uncertainty, and Risk," NBER Chapters, in: NBER International Seminar on Macroeconomics 2005, pages 11-50, National Bureau of Economic Research, Inc.
    4. Robert J. Shiller, 2008. "Derivatives Markets for Home Prices," NBER Working Papers 13962, National Bureau of Economic Research, Inc.
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