For
Immediate Release Thursday, April 1st, 2004
For More
Information, Please Contact:
ISDA AGM Press Room, The
Louise Marshall, ISDA New York, 212-901-6000, lmarshall@isda.org
ISDA Survey of
Top Business Schools Finds
Derivatives
Have A Beneficial Impact on the Global Financial
System
CHICAGO, THURSDAY,
APRIL 1, 2004 – At its annual general meeting in Chicago, the International
Swaps and Derivatives Association (ISDA) today released the results of a survey
which found that finance professors at the world's top business schools
unanimously agree that derivatives help companies manage financial risk more
effectively.
In addition, 99% of respondents agreed that derivatives have a beneficial
impact on the global financial system. The flexibility derivatives offer in
customizing a company's risk profile was a commonly cited benefit. Participants
also noted that derivatives allow companies to shed the risks they don't wish
to take, enabling them to concentrate on their primary businesses. Others
described derivatives as important risk management tools that are flexible and
inexpensive.
Other major findings of the Survey of Finance Professors' Views on Derivatives
include:
§
98% of respondents agreed that managing financial risk more effectively
is a way for companies to build shareholder value. Related insights noted that
gains from trades in risk are "massive" and "utterly dependent
on properly functioning derivatives markets."
§
100% of respondents agreed that derivatives will continue to grow in
use and application. Several participants cited credit risk as the area most
likely to benefit from innovations in derivatives in the next five years. Other
areas cited included real estate and international and emerging markets.
§ 81% of respondents agreed that the risks of using derivatives have been overstated. The need for better understanding of derivatives and their benefits among market participants was a common theme found in related feedback by respondents.
§
The ability to offer a quick and efficient way to manage risks was a
commonly cited contribution derivatives make to the stability of the global
financial system.
"These
findings show a clear consensus among the world's top finance academics that
derivatives are extremely valuable risk management tools and offer a beneficial
way of delivering shareholder value, " said
Robert Pickel, Executive Director and CEO of ISDA. "These experts believe,
as we do, that the risks of using derivatives have been overstated and that
they play a beneficial role in the global financial system."
Methodology
ISDA conducted the survey in March 2004 to explore perceptions of derivatives
and their effect on the global financial system. ISDA polled finance professors
at the world's top 50 business schools, as ranked by the Financial Times,
January 26, 2004. Some questions asked participants to rate their agreement or
disagreement with a statement related to derivatives. Others asked participants
for their opinions on specific issues. A total of 84 professors at 42
institutions provided responses. Participants had a choice of having their
quotes attributed or of remaining anonymous. The full survey report is
available at www.isda.org.
About ISDA
ISDA is the global trade association representing leading participants in the
privately negotiated derivatives industry. ISDA was chartered in 1985, and
today has more than 600 member institutions from 46 countries on six
continents. These members include most of the world's major institutions that
deal in privately negotiated derivatives, as well as many of the businesses,
governmental entities and other end users that rely on over-the-counter
derivatives to manage efficiently the financial market risks inherent in their
core economic activities. Information about ISDA and its activities is
available on the Association's web site: www.isda.org.
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