INSTITUTIONAL AND REGULATORY ASPECTS OF IMPLEMENTATION OF FINANCIAL INSTUMENTS FOR RISK MANAGEMENTIN THE REPUBLIC OF SERBIA

Abstract

This paper presents an analysis of institutional and
regulatory framework for the implementation of a new group of
financial instruments for risk management purposes that should
enable faster economic development of the Republic of Serbia. The
development of a country's economy is measured, among other things,
in terms of the degree of development of its financial market, which
consists of several segments. One of them is the trade of derivative
securities. American authors point out that the economies of
developing countries with more developed financial markets show
better results and more stable economic growth compared to those
which do not have or have neglected the development of financial
markets and instruments. Investors are interested in hedging
(securing) their investments, i.e. with the purpose of reducing or
eliminating financial and business risks. The development and
application of exotic options as modern financial instruments for risk
management purposes is an important requirement for attracting
foreign investments, as well as for increasing domestic investments, as
it offers the possibility of reducing or eliminating risks that deter
investors. In the Republic of Serbia, there is a regulatory and
institutional framework for trade in all types of financial derivatives,
including exotic options as well. Bearing in mind that the financial
market in the Republic of Serbia is becoming a part of the global
financial market, exotic options are one of the instruments for
integrating our economy into global economic flows. However, the
domestic financial market lacks financial derivative instruments that
would give an additional impetus to its development and trade.