The drastic drop in the redemption volume of equity-linked securities (ELS) in the third quarter of this year in South Korea has left hedging counterparties as well as local securities companies exposed to large losses.

The global market sell-off in October prompted a huge drop in the volume of ELS redemptions as products failed to knock-out. Structures triggering the early redemption more than halved to roughly KRW8.5 trillion (US$7.5 billion), from KRW18.2 trillion reached in the second quarter, according to the Korea Securities Depository. The redemption volume in the three-month period ending in September marks the smallest since the second quarter of 2016. While investors are missing opportunities of earl

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