Derivatives in Plain Words by Frederic Lau, with a ... - HKU Libraries

the kind of information that supervisors should seek from their institutions.The HKMA will take account of this framework in further developing thereporting regime in Hong Kong.Second, banks and securities companies are being encouraged to expand theamount of public disclosure which they make about their overall involvementin the derivatives market and trading, the impact of these activities onprofitability and their performance in managing the risks. If provided withmeaningful information, the market should be able to exert its own disciplineon institutions to manage their derivatives business in a prudent fashion. Ifso, this should complement the efforts of the supervisors. In Hong Kong,the information published by banks in their annual reports about theirinvolvement in derivatives and trading activities has increased greatly inrecent years. This policy of more transparency will continue.Third, central banks are trying to obtain more statistics about activity inglobal derivatives markets so that they can better monitor the macroeconomicas well as the prudential aspects of this business. Hong Kong is participatingin this exercise.About this bookAs part of our efforts to raise the level of awareness of our staff onderivatives and to keep abreast of market developments, Mr Frederic Lau,the leader of the HKMA Derivatives Team started to write a series ofarticles on the subject. Other past and present members of the Team,Dr Chau Ka-lok, Dr Hui Cho-hoi, Mr Cedric Wong, Mr Henry Cheng andMr Adrian Pang, also contributed to the series. The articles, circulatedwithin the HKMA, were intended to augment the various seminars andtraining programmes on derivatives organised in-house or by outsideorganisations for banking supervisory staff.We believe the series have grown to such a size that it is worth publishingthem in the form of a book to make them accessible to a larger audience.Preface