Abstract
latest buzzword in the financial literature is Derivatives the birth of which is traced back to 1973 when Fisher and Myron Scholes published an article on European Call Option valuation. In the last decade, many emerging and transition economies have started introducing derivative contracts. As was the case when commodity futures were first introduced on the Chicago Board of Trade (CBOT) in 1865, policy makers and regulators in these markets were concerned about the impact of futures on the underlying cash market. One of the reasons for this concern was the belief that futures trading attract speculators, who can destabilize spot prices. The safety and economy in communications, which enable a deficiency in one place to be, supplied from the surplus of another render the fluctuations of prices much less extreme than formerly. This effect is much promoted by the existence of speculative merchant. Speculators, therefore, have a highly useful office in the economy of society. Since, futures encourage speculation, the debate on the impact of speculators intensified when futures contracts were first introduced for trading; beginning with commodity futures and moving on to financial futures and recently futures on weather and electricity. However, this traditional favorable view towards the economic benefits of speculative activity has not always been acceptable to regulators.
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