Recent Developments in the Research on Derivatives Securities in Korea

This paper reviews the academic research on derivative products and derivatives markets in Korea published since 2010. We classify the literature into three main research areas: Derivative securities markets, option pricing models, and risk management. Topics in the derivative securities markets section include the effects of an increase in the option contract multiplier, the price discovery function of derivatives markets, expiration-day effects, and the trading behavior and strategies of market participants. Next, in the section on option pricing models, we introduce theoretical modeling papers, empirical research on pricing models, implied moments, and the variance risk premium, which is derived from option prices. Thereafter, in reviewing the literature on risk management, we focus on the foreign exchange risk management of firms and the relation between risk management and firm value. Finally, we add three unique topics—equity-linked warrants, equity-linked securities, and credit default swaps—to consider the developments in derivatives markets over the past decade.