Hedging Practice In Russia: Problems And Prospects

Abstract

The economic crises of recent years in the world economy and in Russia have led to the awareness of business participants vulnerability to financial risks and the need to manage them with modern methods. This has led to a significant growth of the financial market segments that offer protection against risks, as well as the development of strategies and tactics for risk management. The most important method of risk management is risk hedging based on trading derivatives. According to the Moscow Exchange, the authors found that during the period 2013-2019 the value of exchange trading in derivatives in the Russian Federation was unstable. It reached its peak volume in 2016 with a structural ratio of 95% futures and 5 % options. The study found that the inefficient use of hedging advantages by Russian companies is due on the one hand, the novelty and complexity of these instruments for domestic business, and on the other - the insufficiently developed legal framework in the field of legal regulation, taxation, as well as the reflection in accounting and financial reporting of hedging operations using derivative financial instruments. The authors analyzed the progressive practice of using hedging instruments in foreign companies. A comparative analysis of the Russian practice and legal regulation of hedging operations has led to the conclusion that there are considerable differences in approaches to accounting for and reporting of derivative financial instruments and hedging activities in banking sector and in non-credit organizations.