Derivatives in International Capital Flows
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NBER Working Paper No. 6623*
Issued in June 1998
NBER Program(s): IFM
This paper will discuss the role of derivative products in international capital flows, especially in providing a means of both reducing and enhancing market risks associated with given net flows. It will emphasize how derivatives can be used to evade risk-control or prudential regulation, circumvent capital controls, drive the dynamics of currency instabilities, and obscure true risk positions and thereby undermine the usefulness of balance of payments capital account categories.
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