Derivatives Summit: Improve processing now, OECD market chief says

Despite ongoing market turmoil, the future for derivatives is bright. Or at least it will be if the industry’s risk management infrastructure is tightened up, said Hans Blommestein, head of the capital markets programme at the Organisation for Economic Co-operation and Development (OECD), at Risk 's annual derivatives summit in London on June 24.

Derivatives are often cited as the cause of many of the recent problems in the credit markets. In recent years, derivative instruments have become increasingly complex and opaque and, as a result, have increased systemic risk within the market, Blommestein argued.

However, he believes these products also provide the hedging tools that are vital for the reallocation of risk, a concept Blommestein refers to as a “risk paradox”. This paradox poses a challenge for regulators when assessing levels of