The number of countries allowing domestic banks and other financial service providers to create and sell financial derivatives for risk management is continually growing. Many enserging markets, however, are still confronted with both lack of financial breadth in financial products and regulatory restrictions limiting derivative construction.

a. What basic financial products and markets are needed to create the currency risk-management derivatives described in this chapter:

b. Why do you think many emerging markets do not possess these elements?

c. Why do you think the governments of many emerging markets still prohibit or restrict the growth of cither the necessary products and markets or the derivatives themselves?