May 2009
Derivatives: Korea’s kiko fiasco
Don’t just blame the locals: these are age-old derivatives-based losses.
The controversy surrounding Korean companies’ attempts to free themselves through the courts from kiko (knock-in, knock-out) derivatives contracts, after the won’s spectacular fall this year threatened to wipe them out, has offered many market participants the opportunity for routine Korea-bashing.
Such problems are the price that banks must pay for doing business in Korea, the argument runs, and it was ever thus.
Whatever the relative robustness of contract law and its enforcement in Korea might be, however, to make this argument is to ignore the fact that the present mess is at heart a typical derivatives blow-up. Lessons are familiar but they could and should be learnt from.
The contracts in question are currency hedging...
Please log in now to view.
Enter your username (email address) and password at the top right-hand side of euromoney.com.
If you do not currently have access to this content, visit the subscription page or call our hotline on +44 (0)207 779 8999.
Subscribe online now and save up to 30%
If you are a trialist or subscriber, please enter your username and password at the top right-hand side of euromoney.com
Subscribers to Euromoney benefit from:
- 12 months access in print and online - on euromoney.com, read the latest issue early online, search for specific developments by region or sector, interrogate the results of Euromoney's benchmark polls, and view the archive dating back to 1996
- More than 30 specialist research guides free
- The results of Euromoney’s polls and surveys
- Tailored RSS news feeds direct to your desktop
- News delivered directly to your mobile device or PC
- Personalised email newsfeed of 'Top stories' and 'Breaking news'
Click here to subscribe