The History of Financial Derivatives: A 2-Part Feature - Part 1: The Emergence and Development of Financial Derivatives Post-Bretton Woods
11 Pages Posted: 2 May 2015
Date Written: April 1, 2014
This 2-part series discusses the emergence of financial derivatives after the collapse of the Bretton Woods accord in 1971. In Part 1, the article explains the concepts that enabled financial derivatives markets to flourish, focusing on the required mathematical concepts. Part 2 continues with enumerating the business models that have been employed by successful commercial participants in the financial derivatives arena. Part 2 also briefly covers the development of over-the-counter financial derivatives, including their misuse during the lead-up to the Global Financial Crisis. The article concludes with the possibility that we may be nearing the limits of what the power of mathematics can do to hedge, and thereby conquer, financial risk.
Keywords: hedging, exchange rate, history, derivatives
JEL Classification: G1, N22, N1, N2
Suggested Citation: Suggested Citation