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The 2008 Great Financial Crisis increased the fluctuations in the stock market in the US and other countries that were linked together through various channels. In this regard, derivative instruments, as one of the main elements of the world's financial markets, had an essential role in reducing the stock market fluctuations and contagion of the crisis. The primary purpose of this study is to examine the negative effect of the derivative instruments on the contagion of stock markets in developing countries, including Brazil, India, China, and Russia, using monthly stock and futures indices over the 2007:01 to 2018:08. By considering the United States of America as the source of the crisis, the hypothesis was tested with the Copula function and Kendall's tau (rank correlation coefficient). The results have confirmed the hypothesis. According to the findings, we suggest that the economy moving towards openness should develop the derivative instruments to minimize the fluctuations as well as reduce the devastating effects of crisis contagion. Also, by upgrading the information of the investors and speculators, it can decrease the depth and intensity of the fluctuations that originated from international crises.

Keywords: Derivative Instruments, Financial contagion, Stock Market, Developing Countries, Copula Function

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