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RISK MANAGEMENT IN INVESTING FUTURES CONTRACT

ON THE VIET NAM'S DERATIVES MARKET

NGO THUY DZUNG

Abstract: Up to now, after 5 years of operation, the derivatives market has operated safely, efficiently and smoothly and grown
steadily. The market size and liquidity have grown strongly. The market attracts an increasingly active participation of domestic and
foreign investors. The paper discusses the derivatives market and risks in investing in futures contracts.

Keywords: Derivatives market, futures contract, foreign investors
Received: January 9 , 2023
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Revised: February 17 , 2023 was only 10,954 contracts/session, then in the first 7 months
Accepted: March 7 , 2023 of 2022, the trading volume of futures contracts was only
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10,954 contracts/session. VN30 futures volume increased
The situation of the derivatives market in Viet Nam
21.3 times, reaching 213,041 contracts/session. The trading
On August 10 , 2017, the derivatives market was volume of VN30 futures contract was highest at 506,025
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officially opened for trading at the Hanoi Stock Exchange contracts on June 21 , 2022, equivalent to a nominal
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(HNX). The launch of the derivatives market is an trading value of more than VND 62 trillion. Open interest
important milestone in the development history and volume (OI) of VN30 futures product also continuously
bringing the development of the Vietnamese stock market increased. At the end of July 2022, the OI volume reached
to a new height. Accordingly, Viet Nam has become the 5 40,232 contracts, increased 5 times compared to the end
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country in the region after Singapore, Malaysia, Indonesia of 2017. The highest open interest level reached 61,090
and Thailand and the 42 country in the world operating contracts on January 14 , 2021. The liquidity of futures
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this advanced market. Thanks to this new market, new products on the VN30 index increased especially strongly
products contribute to diversifying investors' choices, at times when the VN30 index dropped sharply due to
attracting new investors to the market, especially foreign the US-China trade war, the impact of the COVID-19
investors, improving the investor factor and thereby, pandemic, or the drop in global stocks.
increasing liquidity for the underlying market and For the 5-year and 10-year government bond futures
providing risk protection tools for investors. products, the trading volume was still modest due to the
The first derivative product is the futures contract on specific factors of the product. In the first 7 months of 2022,
the VN30 index. In 2019, the derivatives market has added the average trading volume reached 680 contracts/session.
a 5-year government bond futures contract product. In Transactions of foreign investors on the derivatives
2021, the HNX continued to trade in a 10-year government market increase every year, the later year usually increases
bond futures contract product. Up to now, after 5 years by 2-3 times the previous year. In 2017, foreign investors'
of operation, the derivatives market has operated safely, transactions accounted for only 0.1% of transactions.
efficiently, smoothly and growing steadily. The market Derivatives market data for the first 7 months of 2022
size and liquidity have grown strongly. The system of showed that transactions of foreign investors accounted
derivatives trading members has also developed rapidly. for 2.2 % of total market trading volume.
Specifically, from 7 member securities companies at
first, up to now, there have been 23 member securities Risks on derivatives stock market
companies that meet the conditions of technical The market risk
infrastructure system, and has a minimum charter capital
and equity of VND 900 billion or more. The market risk is losses due to unexpected volatility
Viet Nam's derivatives market is increasingly receiving of the underlying index. According to some professional
strong attention from the domestic and international investors in the stock market, the current volatility index
investment public. The number of derivative trading is an opportunity to make a profit in the derivatives
accounts is continuously increasing. By the end of July market. However, it should be noted that the underlying
2022, there were 1,054,683 accounts of investors opened, stock market can be manipulated when the VN30 index
an increase of 423 times compared to 2017. The trading currently depends heavily on a few large-cap stocks. In
of VN30 futures contract has grown continuously over addition to the fact that the leverage ratio used is too
the years. If in 2017, when the new VN30 futures contract large, the loss will be amplified many times due to the
product was put into trading, the average trading volume possibility that indicators like VN 30 can be "driven"

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