Derivatives as Risk-Management Instruments in Global Financial Markets: A Structured Review of Post-2010 Evidence

Abstract

Purpose – This review synthesises post-2010 evidence on derivatives as risk-management instruments:
their effects on firm value and risk, their links to bank systemic risk, the effects of post-crisis market-
structure reforms, and evidence from emerging and newly industrialised economies.
Design/methodology/approach – A structured integrative review guided by SANRA. Twenty peer-
reviewed primary studies (2010–2025), three pre-2010 benchmark studies and five prior syntheses were
identified through documented searches and citation tracing, then appraised for identification strategy,
sample and period.
Findings – Derivative use reliably lowers firm-level risk, but value effects are conditional and sensitive
to identification. Designs exploiting exogenous variation link hedging to cheaper credit and higher
investment, while constrained airlines hedge less, not more. Banks’ credit and foreign-exchange
derivative holdings, and aggregate holdings across countries, are associated with higher systemic risk,
although non-performing loans and leverage matter more where compared. Clearing and trade
transparency have reduced counterparty risk and trading costs in credit default swap markets but
concentrate liquidity risk in clearing houses, and model evidence finds their net systemic effect
ambiguous.
Research limitations/implications – Scopus and Web of Science were not searched directly and no
screening counts are reported; replication strings are supplied.
Practical implications – The synthesis offers evidence-based guidance for treasurers, bank risk
managers and supervisors.
Originality/value – The review integrates firm-, bank- and market-level evidence within one appraisal
framework and sets out a testable agenda on crisis-period hedging, benchmark transition, clearing-house
resilience and emerging markets.