A Conversation for Derivatives
Derivatives
Incitatus Started conversation Jan 2, 2003
The above entry is a very limited and incomplete summary of derivatives. Derivatives are any financial instrument that's value is derived from something else - FX is one example, but so would wool prices, stock market indices... I know for a fact that there are many very complex and varied types of weather derivatives - especially concerning rainfall and temperature.
Really, derivatives can be found for just about anything variable that people want to cover (hedge) an existing exposure, or to make big bets - especially by large companies and mutual/pension funds to undertake risks that would make their shareholders/clients blanche. For a hilarious and terrifying account of the various uses and abuses read F.I.A.S.C.O. by Frank Partnoy.
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