Proceedings

Bills of exchange and checks represent traditional securities being used by entities to
pay their debts and liabilities. Due to the fact that Czech national regulations have
been covering these types of securities for more than sixty years now, entities can rely
on clear rules and good law enforcement. This also explains why they represent the
most commonly used securities in Czech Republic.
Figure 3 offers an overview on our sample entities’ investments in derivative
contracts. Foreign currency derivatives are most commonly used, in the shape of
currency forwards, currency swaps, currency options and currency futures, which
together constitute 37.8% of references.
Other types of derivatives are referred to only in 12.6% of the references. Analyzed
businesses but do not actually use commodity derivatives. Another interesting fact
being observed is that most of the references to the use of derivatives come from the
manufacturing companies.
Figure 3. The relative number of references to the types of derivatives being used by
sample companies
20%
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
FX forward
FRA
Equity forward
Commodity forward
FX futures
Interest rate futures
Equity futures
Commodity futures
FX swap
Interest rate swap
Cross-currency swap
Equity swap
Commodity swap
FX option
Interest rate option
Equity option
Commodity option
(Source: author’s projection)
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All
Services
Derivatives represent a highly debated topic nowadays. When trying to explain the
interest for derivatives we find several reasons. Among them there is also derivatives
contribution in the context of the 2007 financial crisis. It was this point in time that
once again attracted the use of the term toxic assets as equivalent for derivative
financial instruments. SMEs are expected to use derivatives for risk management
purposes rather than for speculation. As it was also shown in Figure 3, most of the
entities have to deal with currency risk or/and interest rate risk.