As a hypothetical case, if we think of an investment in a bond denominated in Thai baht issued by a Thai firm, the investor faces various risks: foreign exchange risk, credit risk of the firm, interest rate risk, etc. Derivatives enable investors to unbundle these risks packaged in a bond into component risks – e.g.
Of course, the macroeconomic developments over the last few years that have brought us to this point have been quite remarkable, and I'll offer some perspectives on some of those key developments in a moment.