Derivatives are synthetic financial instruments that help customers better manage their financial risks.

Using derivatives, customers can reduce the risks that they are exposed to due to adverse movements in market interest rates and exchange rates. For example, a customer can purchase a derivative from Scotiabank or one of its affiliates to convert a floating rate term loan into a fixed rate term loan or, alternatively, to cap the maximum floating interest rate. This reduces the degree of financial risk to which the customer is exposed.

Similarly, liabilities in one currency can be notionally converted into another currency to accommodate anticipated changes in interest rates and exchange rates for different currencies. This can help to improve the customer's management of foreign currency receivables, payments and other foreign currency financing arrangements.