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INDEX LINKED DERIVATIVES

Statistics Directorate    
Definition:
Index-linked securities are debt instruments with coupon and/or principal payments linked to commodity prices, interest rates, stock exchange, or other price indices. The benefits to the issuer of indexing include a reduction in interest costs if the deal is targeted at a particular group of investors’ requirements, and/or an ability to hedge an exposed position in a particular market.

Context:
The benefit to investors is in the ability to gain exposure to a wide range of markets (for example, foreign exchange or property markets) without the same degree of risk that may be involved in investing in the markets directly. Issues linked to a consumer price index also provide investors with protection against inflation.

Source Publication:
IMF, 2003, External Debt Statistics: Guide for Compilers and Users – Appendix 1. Special financial instruments and transactions: classifications, IMF, Washington DC.

Hyperlink:
http://www.imf.org/external/pubs/ft/eds/Eng/Guide/index.htm

Statistical Theme: Financial statistics

Created on Friday, August 29, 2003