Recent Advances in the Literature: Asia–Pacific Derivative Markets

• Date: 01 February 2016
• DOI: http://doi.org/10.1111/ajfs.12122
• Published date: 01 February 2016
• Author: Robert I. Webb

Recent Advances in the Literature:

Asia–Pacific Derivative Markets

Robert I. Webb*

McIntire School of Commerce, University of Virginia

Received 15 January 2016; Accepted 26 January 2016

Abstract

Although most researchers trace the origin of modern futures markets tothe creation of the Chi-

cago Board of Trade in the 1840s, Hamori et al. (Journal of Futures Markets, 2001, 21,861)argue

that modern futures markets originated with the establishment of the Dojima Rice Exchange in

Osaka in the early 1700s. Yet, derivative markets based in the Asia–Pacific region have only

recently become important from a global perspective as measured by relativetrading volume. Not

surprisingly, the recent sharp growth in trading volume has stimulated much research on deriva-

tives traded on Asia–Pacific markets as well. This studydiscusses some of that recent research.

Keywords Derivative securities and markets

JEL Classification: G130, G150

1. Introduction

Although most researchers trace the origin of modern futures markets to the creation

of the Chicago Board of Trade in the 1840s, Hamori et al. (2001) argue that modern

futures markets originated with the establishment of the Dojima Rice Exchange in

Osaka in the early 1700s. Yet, regardless of the actual origin of modern futures markets,

futures and other derivativemarketsbasedintheAsia–Pacific region have only recently

become important from a global perspective as measured by relative trading volume.

1

*Corresponding author: Robert I. Webb, McIntire School of Comme rce, University of Virginia,

125 Ruppel Drive, Charlottesville, Virginia 22903, USA. Tel: +1 434-924-7570, email: riw4j@vir-

ginia.edu.

1

To be sure, a focus on the relative establishment dates of futures exchanges gives a mislead-

ing picture of both the financial innovation process and how market participants dealt with

exposure to price risk before the existence of organized futures markets. Vibrant forward

markets preceded the development of modern futures exchanges in Japan and the U.S.A. and

elsewhere. Nor did the establishment of futures exchanges necessarily represent a sharp break

with the past as some informal over-the-counter markets that shared many of the characteris-

tics associated with modern derivative markets also existed. For instance, Williams (1982)

provides substantial evidence that informal or proto-futures and proto-option markets for

commodities existed in the U.S.A. in the early 1800s.

Asia-Pacific Journal of Financial Studies (2016) 45, 34–47 doi:10.1111/ajfs.12122

34 ©2016 Korean Securities Association