Derivative Financial Instruments (Derivatives) in Hedging Practices of Non-Financial Organizations

Abstract

The financial and economic situation in Russia in 2022 has sharply reduced the market for derivative financial instruments (derivatives), including the instruments applied by non-financial organizations (hedgers) to reduce commercial risks (hedging). At the same time, volatility in commodity markets and unilateral restrictive measures increase the risks of unforeseen property losses in connection with the execution of derivatives, which is why Russian non-financial organizations are increasingly trying to invalidate such contracts. However, a commonly used ground for contesting in many cases (violation of the requirements of a law or other legal act (Article 168 of the Civil Code of the Russian Federation)) turns out to be irrelevant, indicating a distorted understanding of the legal nature of derivative financial instruments and contradictory behavior of plaintiffshedgers. Their typical arguments are explained through the legal features of derivatives: the aleatory nature on which the distribution of monetary obligations of the parties and the uncertainty of the amount of monetary provision are based, and the lack of legal prerequisites for the universal presumption of asymmetry of the parties of the hedging derivative. The legal significance of volatility in the contractual structure of a derivative financial instrument is justified by the strict relationship between its regulatory aleatory nature and the random variability of the parameters of the underlying asset, the econometric characteristics of which do not affect the validity and effect of the contract. The author draws conclusions that unlimited property losses on a derivative are preconditioned not only by its aleatory nature, but also by the hedging objectives. It is noted that unconditional application of the concept of strengths and weaknesses in derivative financial instruments involving non-financial organizations is controversial due to various aspects of contractual and information asymmetry.