Derivatives as tool for risk management
OTC share, interest rate and foreign currency derivatives provide the experienced investor with the opportunity to manage the risks involved in investments and to realise the investment view. Derivatives are commonly used risk management tools, the aim of which is to effectively protect your company from such market risks that might have a significant impact on the financial result of your company. Such risks include, for example, market movements in interest rates and currencies. Without derivatives, it is often difficult or even impossible to protect your company against these risks. Since OTC derivatives are bilateral agreements (bank and customer), the nominal capital, maturity date, underlying instrument and other details of each individual derivative contract can be tailored to meet the specific needs of your company.
Stock options allow you to take a stand on the price development of either a share index or an individual share Correspondingly, interest rate derivatives enable you to realise your view in terms of a decrease or increase in interest rates or even to hedge against interest rate risks in your own bond portfolio.
Utilising foreign currency derivatives, your company can hedge its investments against currency risks or generate returns on its investment portfolio from the foreign currency market without the need to make any direct investments in foreign currencies.
Derivatives as investment products
With the help of derivatives, we can also compose investment products whose yield and risk profile can be tailored to meet your company’s market views and specific needs. The yield can be based on a particular asset category or combinations of different asset categories. Typical choices include structured investments, interest rate derivatives and commodity derivatives. Other alternatives include, for example, stocks and shares, foreign currency, credit risk, an index or an indicator of the price development of this type of underlying instrument.
Contact your own or nearest OP Group member bank and ask our experts to assist your company in selecting the optimal derivative option for its given situation.