Exploring the Performance of Financial Derivatives in the Context of a Global Public Health Crisis and Their Tole in Risk Management

The worldwide implications of the COVID-19 pandemic had a lot of impact on the markets, identifying the weaknesses of financial instruments, especially the derivatives such as credit default swaps (CDS), futures, and options. These derivative risk management tools have been subjected to extreme volatility, forcing specialists to look into their effectiveness under extremely hazardous conditions. This article highlights the participation of derivatives in the market downturn period amid the pandemic, targeting the VIX index and the Global Interest Rate. Employing both quantitative and qualitative perspectives, such as the estimation of event studies and regression analysis, the research investigates the onset of the pandemic and the derivatives markets and assesses these markets' role in responding to global uncertainty. The study's results illustrated the derivative's dual function in the pandemic, which was capable of efficient risk mitigation, although there were chances of market volatility becoming uncontrollable. This suggests that the regulators' supervision and effective risk management technologies are needed to surmount systemic risk during periods of uncertainty