Product development for electronic derivative exchanges

Dr. Michael Durica studied Finance at the University of Trier and received a doctoral degree from the same university in 2006. After working for two years as a consultant in the New Economy, he joined the derivative exchange Eurex in 2001. Since then he works as a derivative specialist in the fields of product development and design of trading and clearing functionality. During this time the current dissertation was written. This study focuses on the product development at electronic derivative exchanges. The case study deals with the idea of derivatives based on the German western ifo business climate expectations index. The index is closely correlated with the annual growth rate of the German production index, which is regarded as the business cycle of the German economy. Business cycle risk still poses a substantial threat to the world’s third largest economy and cannot be efficiently hedged with existing instruments. This gap in risk management can be filled with the instruments presented here. The qualities of the ifo index to serve as an underlying for exchange traded derivatives are carefully assessed and incorporated into a scoreboard. This scoreboard facilitates a quantitative evaluation and reflects a recommended structure for the development of derivatives at electronic exchanges.