South Korea's Outstanding Derivative-Linked Securities, Bonds Hit 96.7 Trillion Won, Highest in Three Years

The outstanding balance of derivative-linked securities and derivative-linked bonds in South Korea climbed to nearly 100 trillion won in the first half, reaching the highest level in three years as gains in domestic and global stock markets revived demand for the products.

According to the Financial Supervisory Service's report on first-half 2026 issuance and management of derivative-linked securities and bonds, released on October 2, the outstanding balance stood at 96.7 trillion won ($69.8 billion) as of the end of June. That was the largest since 96.3 trillion won at the end of June 2023.

Total issuance in the first half rose 26.2% from a year earlier to 42.9 trillion won ($31 billion). Issuance of derivative-linked securities, including equity-linked securities, or ELS, and other derivative-linked securities, or DLS, increased 21.2% to 14.3 trillion won ($10.3 billion). Expanded issuance of single-stock ELS drove the increase.

Issuance of derivative-linked bonds, including equity-linked bonds, or ELB, and other derivative-linked bonds, or DLB, rose 28.8% from a year earlier to 28.6 trillion won ($20.6 billion). Demand expanded particularly for ELBs.

Redemptions also increased sharply. Redemptions of derivative-linked securities and bonds in the first half jumped 47.3% from a year earlier to 41.7 trillion won ($30.1 billion). More products met early redemption conditions as domestic and overseas stock indexes rose, while maturity redemptions of derivative-linked bonds also increased. Redemptions of derivative-linked securities rose 42.2% to 14.5 trillion won ($10.5 billion), while redemptions of derivative-linked bonds climbed 50.3% to 27.2 trillion won ($19.6 billion).

By ELS underlying asset, index-linked products posted the largest issuance at 8.1 trillion won ($5.8 billion). Single-stock products totaled 3 trillion won ($2.2 billion), while hybrid products came to 1 trillion won ($720 million). Within index-linked ELS, products using the Kospi 200 as the underlying asset accounted for 84.6%.

In the single-stock ELS segment, products tied to individual stocks that offered relatively higher yields were especially popular. Issuance of products linked to Samsung Electronics totaled 1.3 trillion won ($940 million), the largest amount, followed by Tesla at 1.2 trillion won ($870 million), SK Hynix at 1.1 trillion won ($790 million) and Palantir at 900 billion won ($650 million).

ELBs were heavily concentrated in single-stock products. Issuance of single-stock ELBs reached 10.7 trillion won ($7.7 billion), far exceeding 4.2 trillion won ($3 billion) for index-linked ELBs and 400 billion won ($290 million) for hybrid products.

Among derivative-linked securities, knock-in products totaled 7.6 trillion won ($5.5 billion), accounting for 53.1% of the total. No-knock-in products came to 6.7 trillion won ($4.8 billion), or 46.9%. Among knock-in products, low-knock-in structures with lower loss-entry thresholds accounted for 98.7%.

Annualized investment returns on products redeemed early or at maturity in the first half were 6.8% for derivative-linked securities and 3.6% for derivative-linked bonds. Returns on derivative-linked securities rose from 6.3% a year earlier, while returns on derivative-linked bonds were unchanged from a year earlier. By product, returns were 7.8% for ELS, 2.0% for DLS, 3.6% for ELB and 3.6% for DLB.