Critically examine derivative instruments that can be used to redeem a country facing a financial crisis?

the country in a financial crisis is a developing country and it needs financial instruments to get away with the crisisCritically examine derivative instruments that can be used to redeem a country facing a financial crisis?
Derivatives don't "redeem" countries. Financial instruments don't help countries "get away with" a crisis.



What on earth are you talking about? Do you have any idea?Critically examine derivative instruments that can be used to redeem a country facing a financial crisis?
What you are discussing is insuring a country against structural failure. That is frought with moral hazard.



If a country purchased derivatives on interest rates, and then forced the interest rates into adverse positions, it could find itself profiting by a self created crisis.



On the other hand, if it is in crisis now then derivatives could be used to hedge its recovery plan. It depends upon the nature of the crisis. For example, if its trade is heavily determined by the price of oil, it could hedge oil prices as a protective cushion. This was done several years ago by European manufacturers on a large scale. They heavily purchased dollar/euro options. When the dollar started to slide from 0.80 to 1.25 the expected correction in sales and income in Europe did not happen for quite some time due to hedging activities.



This is more difficult for even a small country. You need to know the nature of the crisis before it occurs. Hedging is only useful against risks which have not occured yet. Large nations generally do not test their economy using sensitivity analysis, small developing countries are unlikely to have the necessary skills to do so. It is likely adequate data has not been collected about the state of the economy to estimate which items are most in need of hedging. Derivative instruments, other than private placements, do not have the breadth to cover the needs of most small countries. Private instruments are likely to be expensive.



I am presuming this is homework. You need to read the required reading to see what the authors and/or instructors say.Critically examine derivative instruments that can be used to redeem a country facing a financial crisis?
You're either a nerd or you have some crappy homework.