The use of derivative instruments in the Turkish banking sector

Risks that are encountered in the flow of daily life have also an outstanding place in financial market, particularly in the banking sector.The financial operations, beginning with globalization, affected the banking sector in our country. Risk that are related to asset management, came into question and new ones were added. All these changes increased the need to understand, to measure and to avoid "risk". New derivative products are produced as precaution against the risks. Among these new financial instruments, derivative market is the most important concept, including forward, futures, option and swap contracts. Those products which are traded in over-the-counter (OTC) markets and exchanges are basically used to remove the risks that price fluctuations expose. This study covers the function, the importance, the history of the derivatives markets that started to attract the attention of the financial authorities after the 1980's as a result of the emerging risk management understanding. And the study also covers the development, the current situation and the problems of the derivatives markets in Turkey. Recently, the trading volume of these derivatives in Turkey significantly increased. Howevertheuse of derivatives in Turkey, has not developedsufficently. The study depends on data search method releated to the types of derivatives and the derivatives markets. İn this study the term of 2005-2013 is examined. In summary, this study shows that there is a higher risk perception against foreign exchange risk in comparison to interest rates risks in Turkey. KeyWords: Derivative Markets, Futures, Options, Swap, Risk Management.