Question

provide recommendations on how central bank could develop and regulate derivatives market?

Answer 1

The derivatives market is the financial market for derivatives, financial measures like futures contracts or options, which are taken from other forms of assets. The market can be classified into two, that for 1.exchange-traded derivatives and that for 2.over-the-counter derivatives.
Derivatives allow price discovery, refine liquidity of the underlying asset they represent, and
work as essential instruments for limitations. A derivative is a financial instrument that taken its value from an underlying asset.
Central bank could develop and control a derivative market in a country through different strategies. Few of them are listed as follows :
1.Cental bank should increased volatility in asset prices in financial markets
2. Central Bank should increased integration of national financial markets with the international markets,
3. Central bank should facilitate improvement in communication facilities and sharp decline in their costs,
4.Central bank should provide economic agents for the development.

5.Central Bank should have a wider choice of risk management strategies,

6.Central Bank should give opportunities for innovations in the derivatives markets, which optimally combine the risks and returns.