Derivatives practitioners expect much of this year s activity to mirror that of 2000. The volatility will stimulate continued interest not only in hedging but also in using equity positions in other companies as a source of funds, as Telxon did last year. That may prove particularly true should the recent credit crunch worsen. If a company can t issue its own equity or debt and the bank loan market tightens further, the company may opt to raise funds in the derivatives market. Any additional high-profile credit rating problems or bankruptcies will only reinforce the importance of hedging.
New risks continue to appear.
Now, with euro rates sometimes moving in the opposite direction of dollar rates, the bank has to account for the risk. The primacy of hedging within the derivatives markets even prompts some to wonder whether too much caution like too much moderation could become a bad thing. You will need to be a registered user to view the rankings.