Abstract

Derivatives instruments have been a feature of modern financial markets for several decades. They play a pivotal role in managing the risk of underlying securities such as bonds, equity, equity indices, currency, and short-term interest rate asset or liability positions. With the development of Bangladesh’s market economy, it is now becomes very essential of the establishment of a financial derivatives market in this country. In our article is has been tried to explain in detail the theoretical framework of various types of derivatives and their potential usage in strengthening capital market, capital structure of commercial banks, against the fluctuation of major import(petroleum) and export(RMG) sectors, and thus turning Bangladesh’s economy into a strong global one. In the last part of our study, some strong recommendations with the suggestion of phase by phase establishment of a financial derivatives market are included.

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