CONCEPT AND CLASSIFICATION OF DERIVATIVE FINANCIAL INSTRUMENTS AS A METHODOLOGICAL PRECISION ON THEIR REGULATION IN THE FINANCIAL SERVICES MARKET

Abstract

The urgency of the research topic is caused by the rapid growth of capital markets and the emergence of all new financial instruments, the complexity of their structure and the transition beyond the regulatory influence of supervisory authorities. Discussion issues on the identification of derivatives, as well as their certain types, create significant problems with their valuation, the correctness of accounting, and the application of regulatory measures. Inconsistency in the interpretation of derivative financial instruments nature and their certain types is also present in domestic legal acts. Therefore, until the elimination of these shortcomings, derivative financial instruments create additional risks for their owners – financial institutions, as well as for creditors and depositors. The purpose of the research, conducted in the article, lies in the clarification of derivatives nature and developing an appropriate classification of their types in order to its further use with a view of regulation. The methodological basis of the research. The methodological basis of the study is a dialectical approach to the understanding of the essence of derivative financial instruments; general scientific methods of knowledge of phenomena and processes (monographic, abstract-logical, synthesis, comparison, generalization), analysis of legal acts in the part of treatment of derivatives, derivative financial instruments and derivative securities, methods of grouping systematization and generalization in developing the classification of derivative financial instruments. Scientific results. It has been established that in order to maintain the stability of financial markets and their participants, the transformation of regulatory measures should be a permanent development and modification of the financial instruments that are being rotated. Various approaches to the interpretation of derivative financial instruments essence in normative legal acts and scientific literature have been analysed in order to improve the regulation of their issuance and circulation. This made it possible to streamline the conceptual apparatus and to group certain types of derivatives according to certain classification grounds. The basis for classification is the concept of “derivative financial instruments” as the broadest, which includes derivative securities and term contracts (derivatives). The concept of derivatives and derivative securities are delimited based on the study of terminology. It was established that derivatives are standard documents that certify the right and/or obligation to purchase or sell future securities, tangible or intangible assets, as well as funds or make payments on terms and conditions specified by them. However, in some cases, derivatives may acquire features of derivative securities, in particular, when issued through emission and freely traded in markets and bring income (losses) to their owner as a result of changes in their market value. The practical significance. The practical value of the research is the possibility of using the developed classification for the needs of emission regulation and the circulation of derivative financial instruments.

Keywords

• derivative financial instruments, derivative securities, term contracts, asset securitization instruments, hybrid securities, classification of derivative financial instruments