Booms, Busts, and Recoveries Message Board

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Strategies & Market Trends : Booms, Busts, and Recoveries

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To: Ilaine who wrote (4671)	6/10/2001 4:00:18 PM
From: Mark Adams	Read Replies (2) of 74559

There is a world of difference between exchange traded options like puts and calls and the much larger world of derivatives like 'interest rate swaps' and fx hedges. The nominal amount of derivatives (in trillions) is often bandied about, when most are held on books with offsetting positions. Counter-party risk in meltdown mode could be an issue, as this would wreck the risk management & hedging process that the big players use. Discontinuous markets also present some risk. I'm a novice with these things- I read about them in 10Qs and occasional press releases. I think the SEC and FASB have made an effort to get better reporting on individual company positions, which helps build awareness and understanding of what they are and how they can be applied. It really is financial engineering- being a CFO requires much greater sophistication than I thought a few years back.

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