The Asian financial crisis: The role of derivative securities trading and foreign investors in Korea

This paper is part of a larger research program pertaining to the role of derivatives during financial crisis and also part of the research pertaining to the causes of the Asian financial crisis. The Korean market is studied because of two reasons: (1) it is an important example of the Asian financial meltdown and (2) there is a detailed data set available of all transactions by different types of protagonists, including foreign investors. The results in this paper indicate that futures markets and trading by foreign investors played a key role during the Korean stock market turbulence in 1997.