The Value of OTC Derivatives: Empowering Organizations to Manage Risks, Enhance Returns and Optimize Liquidity
Rapport
15-04-2025
ISDA
Derivatives help firms mitigate risk, enhance certainty and stability, reduce costs, dampen the impact of market volatility and enhance financial performance and company value. This ultimately contributes to investment, job creation and economic growth. A study.
The over-the-counter (OTC) derivatives market is a cornerstone of the global financial system, enabling corporations, governments and financial institutions around the world to manage risk, enhance returns, optimize liquidity and efficiently allocate capital. This creates value for users by fostering predictability, reducing costs, protecting against losses and dampening the impact of volatility on earnings – in turn, generating value for the broader economy by bringing greater stability and giving companies the confidence to borrow, invest and hire.
Essential Role in Global Finance
- OTC derivatives act as a foundational layer in modern financial markets, allowing firms to tailor solutions for specific risks, bringing certainty and stability to their operations and enhancing value.
- They are used in advanced economies and emerging markets alike, helping to stabilize operations, manage growth and maintain financial resilience, creating economic value.
High Adoption Across Sectors
A review of 1,187 companies in seven major stock indices shows 87.1% use OTC derivatives, indicating near-universal acceptance of these instruments and the value they bring.
- Both financial and non-financial entities embrace derivatives to hedge risks tied to interest rates, currencies, commodities, equities and credit and to optimize returns, reflecting their flexibility and practicality.
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