The doctoral dissertation was prepared during 2013–2020 at Mykolas Romeris University under the right to organise doctoral studies granted to Vytautas Magnus University together with ISM University of Management and Economics,  Šiauliai University and MRU, by Order of the Minister of Education, Science and Sports of the Republic of Lithuania No. V-160 dated February 22, 2019.

Scientific Supervisor:

Prof. Dr. Irena Mačerinskienė (Mykolas Romeris University, Social Sciences, Economics, S 004).

Defense Council

Chairperson:

Prof. Dr. Valdonė Darškuvienė (ISM University of Management and Economics, Social Sciences, Economics, S 004).

Relevance of the topic. Financial derivatives are financial risk management tools, according to researchers. It is noted that, by their nature, they are only contracts in which counterparties agree to transfer the risk of the underlying asset or set of assets. The development of financial derivatives has made a significant contribution to reducing risk and improving its management. Most market participants aimed at managing or reducing currency exchange rate and interest rate risk on their portfolios, which is why financial derivatives have greatly facilitated this task. Derivatives markets facilitate risk management, provide various markets with more efficiency, and reduce transaction costs.

While the benefits of derivatives to the economy and the financial system have been recognized by researchers, derivatives also pose risks. This is evident by the collapses of Barings PLC, Metallgesellscha , Long-Term Capital Management, Bear Stearns, Lehman Brothers and the financial distress of other companies (JP Morgan Chase & Co., Société Générale, American International Group Inc., UBS and so on) that were trading in derivatives.

However, the risk posed by derivatives to individual companies is only one area of the risky nature of these financial instruments. One of the most significant risks is the impact of derivatives on the country’s systemic risk. The global financial crisis of 2008 was one of the most obvious examples of how derivatives can damage the financial system. According to researchers, the main characteristic of derivatives – risk transferring function – create second risk – the risk of default of the transaction. It is emphasized by researchers that this risk is an inherent part of derivatives and is a key way in which derivatives contribute to country’s systemic risk.

The country’s systemic risk has become a fairly widely discussed topic since the global financial crisis of 2008. Up to 2008 researchers paid relatively little attention to this risk, but there were attempts from researchers to develop country’s systemic risk models and highlight the danger posed by country’s systemic risk. The attention of researchers to the country’s systemic risk has become very relevant after the crisis of the global financial system, the number of scientific articles and researches increased, attempts to model and assess the country’s systemic risk also grew. Researchers’ interest in this field continues to grow, since they keep looking for new ways to assess the country’s systemic risk, to forecast it, to create a more accurate model of the country’s systemic risk and prevent possible future country systemic crises.