The History of Financial Derivatives: A 2-Part Feature - Part 2: The Possibility That We are Coming Full Circle
6 Pages Posted: 2 May 2015
Date Written: April 2014
This 2-part series describes the emergence of financial derivatives after the collapse of the Bretton Woods accord in 1971. Part 1 explained 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 that we may be nearing the limits of what the power of mathematics can do to hedge, and thereby conquer, financial risk.
Keywords: hedging, regulatory, speculator
JEL Classification: G1, G18, N22, N2
Suggested Citation: Suggested Citation