Risk management evolutions at turkdex Basel II standarts and case studies

Risk management is of great importance for either large or small companies. A company managing risks effectively takes a strong competitive weapon. Companies have to use various risk management techniques. However, the rules in the financial markets are changing rapidly today as compared to the former times. That is to say the older techniques are of little importance now. One of the most important ways to manage risks is derivatives contracts. Derivatives markets are able to provide significant benefits for emerging markets economies, some of which are risk transfer, price discovery, and more public information. Turkish Derivatives Exchange (TurkDEX Inc.) is the only entity authorized by Capital Markets Board in order to launch a derivatives exchange in Turkey. Turkdex has strategic and economic responsibilities in terms of establishing an efficient and successful risk management platform in order to meet the needs of investors and to maintain a robust economic system. Today currency futures, equity index futures, interest rate futures, commodity futures, turkdex-gold futures contracts are main investment products in TurkDEX. Basel II is a study conducted by the international banking supervisors in order to update the original international bank capital accord (Basel I), which has been in effect since 1988. Basel II is published by The Basel Committee on Banking Supervision to revise the international standards for measuring the adequacy of a bank's capital. One of the most important points in Basel II standards is to build up a strong risk management process. Taking into consideration these facts, the main objective of this study is to evaluate risk, risk management, types of risks in derivatives and the possible effects of Basel-II on TurkDEX. At the beginning, derivatives and the role of TurkDEX are analyzed. In the second chapter, risk management, development of Basel standards and country practices are evaluated. In the last part of the study the general findings are discussed and then possible risks on the TurkDEX are aimed to explain. And finally, a parametric value at risk method is used to analyze in order to measure the risk of a portfolio of futures contracts.